Bitcoin has gone from a hacker plaything to a mainstream financial instrument accepted in coffee shops.
But Wall Street doesn’t care about the cryptocurrency. It is the technology behind it – the so-called blockchain – which gets finance executives really excited.
Bitcoin is a digital currency, the value of which fluctuates wildly. It has caught the eye of regulators, with New York Department of Financial Services publishing this summer publishing a framework for regulating digital currency firms.
Blockchain is technology that underpins bitcoin, and it could have a huge impact on how Wall Street will operate in coming years.
Blockchain is a distributed ledger through which each transaction is tracked and recorded, eliminating ambiguity on pricing and ownership.
“None of our products are dependent on bitcoin as a cryptocurrency,” Blythe Masters, CEO of Digital Asset Holdings, told Business Insider. “We build solutions on top of any distributed ledger whether it’s the Bitcoin blockchain or a private network.”
Masters previously spent decades at JPMorgan, and her new company is one of several that is seeking to use blockchain technology to help build secure settlement systems for assets.
The company’s looking to make use of blockchain technology extends from small, startups such to big banks: Masters’ former employer JPMorgan for example is working internally to develop blockchain technology, according to a person familiar with the matter.
Attendee lists at recent industry events serve as a testament to how seriously big banks take the technology. Executives from Morgan Stanley, Goldman Sachs, Bank of America, Wells Fargo, Citigroup and Fidelity have been present.
Exchanges are interested too. At the Coindesk consensus conference September 10 in New York, Nasdaq chief information officer Brad Peterson told attendees he expects the exchange to start implementing technology to clear trades, among other functions.
Venture capital executives and bankers said they believe a big influx of capital is coming for blockchain, which has the potential to disrupt various elements of finance and transaction execution.
Lately, industry cheerleaders have pointed to businesses including loan syndication, land titles and property records, and clearing trades as potential uses of the technology.
Speakers at the event September 10, including Masters, said they believed blockchain technology might catch on faster in other countries where regulators are quicker to adapt to new technologies.
“Regulators don’t know how to deal with it,” said Erik Gordon, clinical assistant professor at the University of Michigan’s Ross School of Business. “We’ve got to get regulatory consistency to get into the mainstream.”
Even this early into blockchain’s introduction to Wall Street, budding industry experts are bullish on the technology’s potential.
“The upside is enormous,” Nasdaq’s Peterson told event attendees during the discussion.
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