It was back in January 2009, in the aftermath of the 2008 financial collapse, that blockchain first came to prominence as the underlying distributed ledger technology that powered the Bitcoin cryptocurrency, with Ethereum then following closely behind. Since then, multiple global banks – including UBS, Goldman Sachs, and Morgan Stanley, have poured millions of pounds into the blockchain technology in a desire to future proof their offerings and have a competitive edge in the market.
However, it is not just the banks though that are showing interest and boosting adoption of the technology within their organisations. One of the reasons that blockchain technology has become so very popular over the last few years with businesses and investors, is that it has a transparent digital ledger of transactions and records that are immune to any change or deletion which, in turn leads to simplified processes such as ownership, transfer and payments. By offering these additional traits of increased security, lower costs, time efficiency, and error resistance, blockchain is transforming multiple industries with its decentralised environment.
An underlying reticence to change
The global equity market is an essential part of the wider global economy. In fact, for many it provides the ultimate litmus test of the overall financial health of the world in which we live. The adoption of blockchain technology within the equity market will not only pave the way for streamlining transactions, but it will increase the speed of trading and settlement processes between businesses and investors. However, until this moment the global equity market has been remarkably slow on the uptake of this revolutionising technology, compared to the likes of digital currency and mobile payments.
There is an underlying reticence to change within the global equity market. It is not only struggling to come to terms with blockchain and its benefits, but finding a way to better align the wider cryptocurrencies trend with the paper money of old. For some reason, emerging equity such as cryptocurrencies are still viewed differently to legacy stocks, funds and securities. The situation hasn’t, of course, been helped by the fact that the governments have been so slow to ensure regulations and taxation for cryptocurrencies are brought in line with the traditional currencies we know. It is clearly time for them to bridge this gap.
Need for a digital transformation
Not only is buying and selling shares very expensive, intricate and restricting, but it has significantly fallen behind other advancing developments within the wider financial sector. As one of the biggest and most vital areas of the market economy, it is essential the equity market looks to drag itself into the 21st century, to stay relevant and ahead of the competition. When the global equity market was created two hundred years ago the world was a very different place, and whilst there was something of a revolution in the 1980s when the computerisation of the trading floor caused trading volumes (along with volatility) to skyrocket, another step change is most certainly required with security for its users recognised at its core. Whilst country-specific stock exchanges made sense once upon a time, today the world has become a lot smaller and the equity market needs to take advantage of a more global investment pool.
The sector needs to ensure that trading becomes a more seamless, straightforward experience and promote continued digital transformation within the industry, rather than resisting against it like they have done previously. The solution really is staring it in the eyes. There is no end to the potential of this technology in improving costs and lowering risks for the equity market. Blockchain is both transparent enough to ensure there is democracy, visibility and honesty, whilst being private enough to protect businesses and investors alike. The technology is an enabling force to removing the middle layers, administration and reconciliation steps currently hampering today’s global equity market.
Cutting out the middlemen in investment
A modern equity network needs to be built with the interests of both investors and business owners at its core. Blockchain technology can help to not only revolutionise the equity market and bring influence and power back to the individual investor, but through decentralisation and the use of increasingly popular cryptocurrencies it can provide a safer and more transparent network for trading from both parties. Blockchain can help to remove the well established shackles of traditional stock exchanges, government regulation and the institutional and corporate stranglehold.
Cutting out the middlemen so that thousands of business owners, of both private and public businesses, can sell shares in their companies direct to investors, not only gives them greater control to be able to steer their business forward, but ensures that businesses and investors become more indelibly linked paving the way for a smooth, and streamlined trading process that will revolutionise the equity market.
Heading into the 21st century
It is clear that a revolution and shakeup in the equity market is needed. One that removes several barriers to entry and the barriers to investment. There will be no more stock exchanges or trading through banks, brokers and intermediaries. No more expensive, exaggerated fees and slow clearing processes that can take days, not just hours. Thus, promoting global innovation and reinventing the entire processes in trading shares so that it is something that is accessible to all.
There is no limit to how blockchain can significantly reduce costs, improve efficiency, lower risks and heighten security within the global equity market. By using blockchain technology to revolutionise the way we all buy and sell shares, a global equity market that is worth US$76 trillion can truly be unlocked and offer its businesses and investors unlimited benefits, compared to its current state. The adoption of blockchain can create a faster, effective and more reliable equity market that will unleash a new era of efficiency, innovation and security, and bring the equity market firmly into the 21st century.
Sascha Ragtschaa, CEO and Co-Founder, Chainium
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