Blockchain for Capital Markets: A Pipe Dream


Blockchain is not a new technology and the Bitcoin network that is built on top of it has been operating since 2009. But it is only in the past year or so that the financial community stopped regarding it with contempt as an anarchist phenomenon and started seeing in it the promise of a revolution in capital markets operations.

The switch in the industry perception about blockchain technology is very well represented by the growth of the capital raised by blockchain initiatives targeted at financial services and infrastructure. From less than US$10 million of funding in 2013 raised globally, the sum grew to US$35 million in a year and in 2015 “blockchainish” startups, looking to revolutionize the financial industry, raised approximately US$90 million. In the first two months of 2016, already US$67 million has been invested in firms aiming at implementing blockchain-related technology in financial services.

In fact, in today’s financial industry, Blockchain has become a “keyword,” dropped in every conversation about future strategy. In that sense, it resembles the “cloud” a few year back: it’s an innovation that was not specifically designed for financial services but promises significant changes and benefits to the industry if implemented wisely. 

However, as often with any radical technological evolution, there is a significant knowledge gap between the technical people who understand the technology and the business world that is looking for a solution. And as usual the debate is filled with technical jargon like “hash,” distributed ledgers, smart contracts, etc. that keeps operational staff from questioning the practicality of the emerging solution. It is on that spread between “the people who know” and “the people who need” that many fantasies and utopias emerge, to eventually crash on the reality of hard ground. We aim to close that gap by the end of this report.

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