Distributed ledger technology (DLT) is able to change the role and business model itself for the first time, claimed one panellist at the GFF Summit in Luxembourg.
David Treat, managing director, global head of capital markets blockchain practice, Accenture, said: "Over the years, we have used technology to make things electronic, faster, and automated, but we largely left the underlying business processes the same."
Treat cited: "Now for the first time, through the use of DLT, we are able to change the business model itself, eliminating work instead of just making it faster. The financial services industry has been all about moving assets from sellers to buyers, but one of the things that is a characteristic of the digital world is that you don’t have to actually move the asset like you did when it was paper."
"One of the special aspects of DLT is that we can operate in the digital world with the certainty that we have in the physical world. We now have the ability to change the owner of the asset without actually having to move it from one company’s database to another’s through a shared data system.”
Jens Hachmeister, managing director, DLT, crypto assets and new market structures, Deutsche Börse AG, commented: "In our industry, the main drivers for change are regulation and technology. Technology is a catalyst for change. However, before new technologies can unfold their full potential, there needs to be a clear value proposition. New technologies do not provide a value in itself but they are rather an enabler for new business opportunities."
Meanwhile, the moderator, Philippe Seyll, CEO, Clearstream Banking, asked the panel the following question: "In Deutsche Börse, we say to create an ecosystem that works takes would take about six years. Is the capital markets ready for the full adoption and is the usage of new technology going to shorten the market adoption?
To this, Hachmeister replied: "I think this is a bold statement. We have to bear in mind that the current market infrastructure has been created over decades and right now this is being challenged by new technologies."
"We need to have the technology at the stage where it is really applicable on a large scale. We have seen a lot of progress here over the last 12 months. We need catalysts like fintechs to challenge existing market infrastructures. We need regulators who are open and embrace new technologies to make these transformations happen."
"Most of the regulators are open to these new technological developments but still need to find a way to keep up with the high pace. These components need to be mobilised at the same time to make this transformation successful."
Guido Stroemer, founding partner at HQLAx, said: "Total transformation of business models takes a long time, and successful innovation is all about fostering market adoption by delivering incremental, tangible wins to end users."
Stroemer continued: "You need a great use case, you need great technology, and most importantly you need people who are willing to embrace new technology and new operating models."
He added: "This industry is a people’s business and people have to want to enact change. Clearstream is the first mover for connecting to the HQLAX platform, and we are looking forward to collaborating with other major triparty agents in Europe to help foster market adoption of a new operating model for collateral upgrades."
Discussing blockchain, Hachmeister said: "Blockchain in the short term is overhyped but in long term probably underhyped. Now we are entering into a new world of digital assets representing what we recognise as financial instruments today."
"The serious players in the industry will start to come up with a solid market infrastructure for digital assets. Once we have a digital representative of any kind of asset on the one hand and a comprehensive infrastructure for these digital assets on the other hand, we are really opening up to a whole new era of financial markets.”
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