These are difficult days on Wall Street. Regulations, concerns about global growth and slim returns on equity are driving executives to find ways to be leaner, more efficient and more profitable. One emerging technology that could have a huge impact is the distributed ledger technology called blockchain.
Some people know blockchain as the underlying technology behind the controversial digital currency Bitcoin. However, blockchain is so much more; it’s incredibly innovative and its promise is far-reaching. This technology is a secure and transparent way to digitally track the ownership of assets before, during and after transactions, and it has the potential to ultimately transform everything from how stock exchanges operate to how proxies are voted. From Wall Street to Estonia, financial firms are investing in and testing blockchain.
McKinsey & Co. wrote that blockchain will “dramatically reshape the capital markets industry,” but that “the blockchain revolution will not happen overnight.” Nasdaq Chief Executive Bob Greifeld said, “Blockchain will bring levels of efficiency to the financial markets that we’ve never seen before.” I agree and view blockchain as something that, like the internet in the early ’90s, has the potential to fundamentally transform our inherently complex financial system.
Our strategy is to invest organically, as well as through leading innovators in this space. In January, Broadridge made a minority investment in Digital Asset Holdings, a start-up led by former J.P. Morgan executive Blythe Masters that is working to use distributed ledger technology to settle short-term lending arrangements between dealers known as repos, among other applications. We also recently joined the Hyperledger Project, an open-source project advancing common blockchain standards. We’re not the only ones exploring this technology. Aite Group forecasts that capital markets firms will spend about $400 million annually by 2019 developing blockchain-enabled solutions, up from just $75 million last year.