Page 13 - February 2018 Disruption Report Flip Book

The overarching potential of blockc
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THE FUTURE FINANCIAL INFRASTRUCTURE FJEABNRUUAARRYY 22001188
The potential of blockchain has generated significant debate over the preceding This is particularly true in the custody and securities settlement chain.
THE FUTURE FINANCIAL INSFRASTRUCTURE
The potential of blockchain has generated significant debate over the preceding two years. This is Blockchain will becopmarticeulatrhly etrue“bin ethae tciunstogdyhaendasretc”uritoiesfstehttlemegntlochbaina.lAfipnrimaenexcaimaplescoyusldtbeemcentral counterparty clearing houses (CCPs) whose importance has been elevated following passage of the
Dodd-Frank Act and European Market Infrastructure Regulation (EMIR), which have mandated a
“Our findings suggest this technology [blockchain] has the potential to live-up to the hype and
growing number of over-the-counter (OTC) derivative transactions be centrally cleared through these
reshape financial services, but requires careful collaboration with other emerging technologies,
market infrastructures.
regulators, incumbents and additional stakeholders to be successful,” said the World Economic As block Forum. “Blockchain will become [the] beating heart of the global financial system... Blockchain
As blockchain operates on a real-time trade settlement time-frame and there is complete transparency
could redraw the structure of financial institutions and the back-end of services as we know operates that trading counterparties can meet their obligations at the point of settlement finality, some have
them today... [allowing consumers] to pay less for all kinds of financial activity, from international real-time questioned if it will remove the need for CCPs. This is overly simplistic. CCPs are likely to still have a
ropleayinmaebnltoscktochthaien terraadfionrgtwofosftuoncdkasmaenndtabl orenadsso.nsIt. Fciorsutl,dthaelsyowgoiuvled raedgduvlatluoersinntehweirccalpearbinilgitiaensd,
settleme
neatltlionwg ifnugnctthioenmastothsatot predreugcuelsastoerttylevmioelnattivoonlusmbesfoarnedthdemy asntadrtfoarnsdettolemwaentcthliqmuiodritey.eFfufertchteivrmeloyrefo, r
frame an in derivative markets through to administrative demand for settlement in cash markets. is compl
they would have a role in terms of transaction collateral management, ranging from period transactions
warning signs of financial crises...”
ThSeIXsixSsTteEpPs Sin aINbloAckBcLhaOinCtKraCnsHacAtiIoNn TRANSACTION
transpar that tradi counterp can mee obligatio point of finality, s question remove t for CCPs
123
AB
A and B wish to conduct an ‘interaction’ or ‘transaction’.
Cryptographic keys are assigned to the interaction that both A and B hold.
The interaction is broadcast and verified by a distributed network.
456
Once validated, a This block is then added to the The transaction between new block is created. chain, creating a permanent A and B is completed.
‘golden source’ of the interaction.
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B A
B A