Blockchain “can’t be silver bullet”

Talk about blockchain technology has dominated the industry in recent months.
By Paul Walsh
Waiting for distributed ledger technology to be a universal answer to the industry would be a mistake, according to a former vice president of JP Morgan.

John O’Hara, current CEO of technology firm Taskize, suggested that the fragmented nature of the industry means that blockchain will never be able to offer a universal solution.

“It’s a hugely fragmented world without standardised processes across custodians, sub-custodians, central securities depositories and central counterparty clearing houses.”

“Waiting for blockchain technology to step in as the silver bullet is the wrong mindset. Not only is it too long to wait, but also creating efficiencies today will smooth the implementation of blockchain down the line,” said O’Hara.

Blockchain technology has been hailed by custodians as being the future of the industry with potential to streamline processes such as settlement, clearing and corporate actions.

Earlier this month, US regulators warned that distributed ledger technology could pose “risks and uncertainties” to the financial stability of capital markets in a report.

The report from the Financial Stability Oversight Council warned that market participants “have limited experience working with distributed ledger systems” and notes that “vulnerabilities” resulting from the new technology may not become known until it is too late.

O’Hara did suggest that there may be a future for distributed ledger technology in spite of these doubts.

“The potential of blockchain could be significant and there is a strong possibility it may disintermediate large components of the post-trade space and bring numerous advantages to these antiquated processes.”

“However, this success will only happen if firms work together towards standardising the current post-trade environment and improving existing technology,” said O’Hara.