Capital markets day update
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Last week we had our capital markets day in London and in my presentation I talked about the potential for disruption to capital markets from blockchain technology and distributed ledgers. I emphasized the importance of fiat currency on a distributed ledger and in the final slide of my presentation I set out two broad paths for disruption. The first one suggested disruption would be focused on discrete targeting of currently slow capital markets processes such as syndicated loans which are large markets and can be dominated by a few financial institutions on the buy-side and sell-side. This is the path that DAH and others are pursuing and there was broad agreement to this path. The second one suggested that should fiat currency, such as sterling, go onto a distributed ledger then this would provide a platform for accelerated disruption. This would need the input of a central bank and the agreement of a consortium of banks to implement the architecture. There was no small degree of incredulity around this second path due to the usual concerns about “herding cats” (i.e. a consortium of the banks) and the slow bureaucracy of organisations such as the Bank of England. Then two pieces of newsflow came out later in the week. Firstly, nine banks announced a partnership led by start-up R3CEV to develop common standards for blockchain technology in an effort to broaden its use across financial services. Then, Andrew Haldane, Chief Economist at the Bank of England gave a speech in which he highlighted the benefits of having a central bank-backed digital currency as a means of imposing negative nominal interest rates – something I highlighted in my research Fiat Currency on a Blockchain. These are two very intriguing data points in the evolution of the blockchain/ distributed ledger story which observers should follow closely.