“Rapid advances in information technology are enabling more entities to gain access to larger amounts of rich information at lower cost, and the impact has been felt across numerous industries” — Paul Ebeling
Blockchain technology is a digital phenomenon that has the potential to change the financial market paradigm. It could be deployed to simplify and accelerate banking processes, such as settling a wide range of real-world financial transactions using a distributed ledger that is verifiable without the need for a third party. We may begin to see the emergence of smart contracts or crypto securities, whereby stocks become digital records that can be both issued and traded on the Internet, considerably reducing transaction costs especially if issued directly into the market. A digital stock system could also allow small and medium-size companies to raise public funds more easily and at lower cost.
Blockchain technology represents an opportunity to recreate the financial system that we know today in a parallel, Internet-based universe that is both transparent and secure.
The same principles that govern securities: issuance, trading, clearing, and settlement would continue to apply. But they would operate on the network architecture of the Internet, instead of on the complex myriad of trading, clearing, settlement, and depository venues that have been created over time across multiple asset classes.
There are indications that institutional investors have started to use crowdfunding websites to gain stakes in new businesses, such as in the real estate sector.
One website, for example, enables crowdfunders to pool their capital and compete with institutional investors or coinvest with venture capital funds. There is a perceived threat that more buy-side firms will tap crowdfunding sites. And as more institutional investors start to recognize the opportunities that crowdfunding websites provide, there could be an emerging threat to parts of the CMIB industry, such as the private placements market or the corporate and investment banking payments world.
The line between paradigm changers and disrupters is not well defined yet. But if investment banks react creatively to the new digital dimension, they can find ways to turn potential disruption and disintermediation into real opportunity and competitive advantage
Have a prosperous day, Keep the Faith!