Blockchain technology and distributed digital ledgers, technologies that promise to be as disruptive as the internet, are coming soon and financial institutions better be prepared. So says former JP Morgan credit default swap pioneer Blythe Masters. Masters spoke on these subjects in a recent speech at Exponential Finance 2015.
Masters believes that distributed digital ledgers will transform how the financial world operates. They also have the potential to empower business models, not just disrupt them. If Masters was in charge of your financial operation, or was a regulator, she would be exploring the potential of the distributed financial ledger to the fullest extent possible.
“How seriously should you take this? I would take it about as seriously as you should’ve taken the concept of the internet in the early 1990’s,” she stated.
Masters began her talk in New York on June 2 by asserting that, “Economic transactions on a digital ledger can be programmed to record virtually anything of value.”
According to Masters, the ability to record “information that represents or evidences title to, for example, a financial instrument like an equity, or a bond, or even a loan,” can disrupt and empower business models by lowering their costs, increasing their efficiency and reducing their risk.
In concrete terms, what this means is that the entire life cycle of a trade may occur at the trade entry level, she pronounced. “That’s much earlier in the stake of process than what you are accustomed to seeing in mainstream financial infrastructure.”
She asked her audience not to get “overly excited.” “The world is still a long way from a state in which distributed digital ledgers have been able to be universally adopted…We won’t get there overnight, but we will get there.”
The Cointelegraph, which reported on this speech, writes, “Masters, who was recently appointed CEO at Digital Asset Holdings, a fintech startup that intends to build a software platform for financial institutions to settle trades made on third-party sites in digital currencies and in digitized versions of more traditional financial assets, follows the trend of bankers ditching Wall Street for the more promising fintech industry.”
The Cointelegraph also states, “Obviously, Masters isn't the first Wall Street veteran to believe in the revolutionary potential of the blockchain technology. More than a dozen of big banks and tech firms are reportedly interested in distributed ledgers, among which Nasdaq, Overstock, IBM, Samsung, UBS, Intel, Western Union and Banco Santander.”