In a world where at least USD$3.1.trillion of blockchain derived business value is expected to be garnered by 2030, the way we all do business is set to be disrupted for the greater good.
At a recent event at Securities Industry Development Corporation (SIDC), which is the learning and development arm of the Securities Commission Malaysia (SC), the topic of blockchain in the capital markets was the key facet of a wide ranging seminar that was explored by four eminent speakers in the field. The audience was treated to in-depth observations, insights and learnings from Hamid Rashid of Finterra, Cris D. Tran of Infinity Blockchain Ventures, Rashdan Ramlee from Aegis Associates and Masumi Hamahira from Bitcoin Association. When it comes to the world of blockchain and how it relates to capital markets, there is no center and everything is evenly distributed to a certain extent. A blockchain is a trust free network, but the blockchain itself is trustable. Everything is secure, transparent and independently provable too. In a lot of ways, blockchain networks are the most robust and resilient structures that are made by mankind.
Of course, like all new technologies, there are challenges that are cropping up with the adoption of blockchain-related applications. Blockchain maturity, customer adoption, interoperability, security concerns, a fragmented field and of course the complexities of legal and regulatory compliances are major factors in the overall success of these initiatives in the capital markets space. Just to put matters in perspective, the current market capitalization for crypto-related assets stands at USD$550 billion, which is almost the size of reserves in countries such as Brazil, Spain, Singapore and Russia. It may be dwarfed by the 27 trillion market cap in the US, but it’s still larger than reserves in Ireland, Israel, Greece, Turkey, Thailand and Vietnam.
Blockchain will link the ‘off-chain world’, that can consist of elements like stocks and shares, real estate, bonds, gold investments and even agricultural products with the ‘on-chain world’ of tokens that represent the economic value and rights of assets. The tokenization of assets native to the blockchain between issuers and investors promises to reimagine how the world does business in the future. Tokens representing pre-existing real assets will compete with tokens that are focused on new debt securities, equity securities and STO (Securitized Token Offerings).
There are a lot of key talking points in this regard, but by far, the central bank digital currency (CBDC) is something that almost every government the world over is looking at. It will be widely accessible, central-bank issued and it can be used as virtual currency that can be used for deposits, remittances, and so on. The tokenization trend could also well be the future of securities, with three basic types of security tokens in the form of equity tokens, financial instrument tokens and real assets tokens. Ultimately, blockchain is set to transform financial services dramatically reducing the cost of transactions and speeding up payments. Its decentralized nature is built on transparency, immutability and intelligent contracts that ensure trust and efficiency to be major cornerstones of the ecosystem within capital markets. In short, blockchain can transform the digital economy by improving profitability and quality, increasing transparency among parties and reinventing products and processes.
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