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Abstract: Blockchain technology, along with distributed ledger technology (DLT), has caused quite a stir over the last year as many experts now consider that it has the potential for facilitating multiple bursts of creativity and catalysing an exceptional level of digital innovation not seen since the advent of the Internet. Of all sectors, the financial one in particular is very likely to be the most impacted by the technology's potential for disruption. In this article, we first present the essential aspects of the new transactional model that DLT brings about. We then outline what we estimate to be the main areas of applications of DLT to finance, whether for capital markets or corporates. Last but not least, we attempt to evaluate the likely impact of DLT on financial markets, with a particular focus on the post-trade infrastructure for which DLT seems particularly promising.
Key words: blockchain, distributed ledger technology (DLT), financial markets, corporate finance and governance, disintermediation, post-trade infrastructure.
Information technology has played a key role in the development of modern financial services. As underlined by SHILLER (2003), it is the development of information technology that has made possible the proliferation of many, if not all, contemporary financial services. Improvements in information infrastructure have been essential for modern finance as they allowed the transformation of countless stacks of paper, hard to classify and archive, into electronic data. Because they are now capable of better managing data and information, banks have been able to expand their product offerings, improve their processes and keep track of the increasing number of transactions. And today financial institutions heavily rely on large information systems and databases to conduct their business, whichever the field - securitization, derivatives, or just plain commercial banking to name a few.
Blockchain technology has been holding many promises for both the financial sector, in particular its financial markets infrastructure, and the insurance industry. At the heart of this enthusiasm for DLT lies the new decentralized transactional model that the technology permits, whose principles are based upon Satoshi NAKAMOTO'S white paper (2008). Indeed, one of the key drivers of the blockchain wave of innovation is the transition it should facilitate from centralized and proprietary ecosystems to their decentralized and mutualized equivalents. For financial actors, banks in...