Blockchain Innovation: Opportunities, Challenges and Policy Implications
From debt to equity and funds management to derivatives, established primary and secondary markets are being transformed by decentralized technologies—and regulators are keeping a close watch on the changes. As the industry around blockchain and digital assets matures, we are seeing tangible use cases emerge. But what are the potential challenges and policy implications as these technologies progress, and what opportunities does the industry have to work with regulators on solving them?
At the recent OECD Global Blockchain Policy Forum in Paris, I had the opportunity to speak alongside several industry leaders to discuss the latest developments in digital financial marketplaces, and explain how these changes are reshaping the sector. In addition, our panel shared why sustainable applications of Distributed Ledger Technology (DLT) hinge on clear, appropriate and consistent regulatory approaches.
DLT Innovation Trends Surprisingly, the day-to-day activities for some organizations in the financial services industry still involve paper documents and fax machines. Even those that have moved to digital formats have designed bespoke systems that slow down communication and data management.
By leveraging DLT, leaders are working within traditional financial institutions to create ways to automate processes and unleash innovation. During the panel, for example, Vanguard’s Head of Blockchain Strategy explained that the company is currently testing blockchain to automate certain index fund-related activities as a precursor to larger and more public capital markets use cases. And the CEO of ISDA shared how their new Common Domain Model (CDM) uses distributed ledger technology to provide common data structures and processes for derivatives, encouraging interoperability and consistency between firms and platforms.
Outside of traditional financial players, there are a number of fintech companies building and innovating in the space as well. For example, there are companies around the world now using blockchain and digital assets to facilitate donations and raise funds for new ventures. During the panel, the CFO of Binance shared how the company is leveraging blockchain in Uganda to deliver digital assets to fund initiatives like free lunch for school children. Binance envisions programs such as these as proving grounds for a future where people can raise capital and fund innovation with the only requirement being access to the internet.
A Collaborative Approach Ripple’s vision is to collaborate between traditional financial institutions and technology innovators for the explicit use case of cross border payments. Specifically, by leveraging the digital asset XRP as a bridge currency, Ripple facilitates instant fiat-to-fiat payments across borders for partners like MoneyGram.
