A new report released by the Global Financial Markets Association (GFMA) asserts that traditional markets have the potential to save around $100 billion or more each year through the implementation of distributed ledger technology (DLT). The report, which was produced in collaboration with the Boston Consulting Group and other industry experts, urges regulators and financial institutions to seriously consider the advantages of this technology.
DLT, a term encompassing systems that record transactions and digital information, holds significant promise for driving growth and innovation, according to GFMA CEO Adam Farkas. Farkas emphasizes that this potential should not be overlooked or restricted, especially in areas where regulatory oversight and resilience measures already exist.
The report highlights that incorporating distributed ledgers to streamline collateral processes in derivatives and lending markets could result in an additional $100 billion in savings. Moreover, leveraging smart contracts to automate and fortify clearing and settlement processes could reduce overheads by $20 billion annually.
GFMA’s analysis reveals that the implementation of DLT would have the greatest impact on clearing and settlement systems, followed closely by custody and asset servicing. While primary markets and secondary trading may experience less significant effects from this technology, tokenization within these markets could enhance risk mitigation and deepen liquidity.
Internationally, the adoption of DLT is gaining momentum. Euroclear, a prominent European securities clearing firm managing over 37.6 trillion euros ($40.9 trillion) in custodial assets, recently announced its intention to integrate DLT into its settlement process.
However, there are still challenges to address in implementing DLT within existing financial systems. Last year, the Australian Securities Exchange abandoned its plans to update its 25-year-old clearing and settlement system with DLT, resulting in a $170 million setback.
Also Read: ECB Should Integrate DLT into Payment Settlement Systems
This GFMA report follows a prediction by Citi investment bank, made just two months ago, that the global market for blockchain-based tokenized assets could reach a staggering $5 trillion by 2030. The findings further reinforce the potential of DLT to revolutionize traditional markets and generate substantial cost savings
