The traditional financial industry is witnessing a daily increase in advocacy towards the adoption of distributed ledger technology.
Blockchain technology, in particular, has shown immense potential. For financial institutions, it promises considerable savings in infrastructure, transactionality, and administrative costs. Moreover, it can disintermediate the digital transfer of financial assets, reducing the role of central counterparties' and can also improve trust, accuracy, and resilience in financial ecosystems.
So, why are we not seeing a broad adoption of blockchains within the traditional financial markets?
The short answer is:
Everyone within the Crypto space agrees that all cryptocurrency transactions must remain "anonymous" and "P2P" without the need for a third party. Nevertheless, what if we have a new generation of blockchains that are able to provide an "Optional KYC" feature to financial institutions? By default they provide anonymous transactions when DeFi protocols and non-financial enterprises use them. This will lead to massive adoption of blockchain technology in both traditional financial markets and consumer-based decentralized applications.
Central banks, commercial banks, stock exchanges, and many other FS players keenly explore blockchain’s potential. According to the World Economic Forum report published in August 2016, over 24 countries are investing in blockchain. Over 90 corporations are part of blockchain consortia, and over 2,500 blockchain patents have been filed over the past three years.
Additionally, over 90 central banks worldwide are engaged in blockchain discussions. In terms of funding, over the past three years, US$1.4 billion has been invested through venture capital to explore blockchain usage in the FS industry.
Recently, various blockchain technology platforms have been and are being developed. Over 300 technology startups, mainly in the UK and the US, have been working on enabling blockchain for the FS space – Kraken, BTCJam, HelloBlock, BlockCypher, Bifubao, Digital Tangible Trust, Ripple Labs, Coinbase, BitPay, and BitPagos to name a few.
Established technology vendors have played a vital role in the blockchain ecosystem. For example, R3, IBM, ConsenSys and Chain are the key players in the global blockchain technology market. Also, regulators and policymakers of FS have begun focusing on blockchain adoption. FinCEN, Commodity Futures Trading Commission (CFTC), and Securities and Exchange Commission (SEC) are just a few examples.