Distributed Ledger Technology: Evolution or Revolution?

by Anshuman Jaswal, PhD, December 10, 2015
Industry Trends
Global

Abstract

The interest and progress around blockchain and distributed ledger technology have been remarkable. The technology is believed to have the potential to replace the entire plumbing of the capital markets industry. At a time when volumes and profitability are under severe stress, and when regulation seems to be the guiding force for technological investment, blockchain seems to have fired the imagination of most of the market participants.

In the report Blockchain and Distributed Ledger Technology: Evolution or Revolution? Celent looks at the recent development and the potential for blockchain and distributed ledger technology in the global capital markets.

A term that is expected in the debate around blockchain and distributed ledger is “disintermediation.” This technology is considered to be so powerful that it could lead to the displacement of entire layers of intermediaries. In an extreme scenario, sell side firms, exchanges, central counterparty clearinghouses (CCPs), custodians, central securities depositories (CSDs), many technology vendors, and utility providers could all be displaced by new or hybrid technology providers which would support the underlying infrastructure of the blockchain-reliant capital markets.

Based on the early development and trends, we can create certain scenarios for the possible adoption of blockchain and distributed ledger technology. In all likelihood the actual situation a few years down the line might be a composite of the different scenarios discussed here, but analyzing these scenarios could help us develop an understanding of the direction of the capital markets industry with use of this new technology.

The report begins with a discussion of the advantages of the use of blockchain and distributed ledger technology within capital markets, then looks at the various current and proposed uses of such technology, along with enumerating possible scenarios for the capital markets overall.

“The promise of blockchain and distributed ledger technology is undeniable, but its adoption is still nascent,” says Dr. Anshuman Jaswal, a senior analyst with Celent’s Securities & Investments practice and author of the report. “We believe that, over time, distributed ledger technology can help create a landscape in which the industry value chain will become more efficient and compact.”

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
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Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

2

Introduction

3

 

Key Research Questions

3

Advantages of Using Blockchain and Distributed Ledgers

4

Scenarios for Adoption of Blockchain and Distributed Ledger Technology

6

Impact of Distributed Ledger Technology on Different Market Participants

9

Conclusion

11

Leveraging Celent’s Expertise

13

 

Support for Financial Institutions

13

 

Support for Vendors

13

Related Celent Research

14

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