Digital Assets, Distributed Ledger Technology, and the Future of Capital Markets

In recent years, financial intermediaries and service providers have looked to Distributed Ledger Technologies (DLT) as a potential way to reduce inefficiencies, increase speed and transparency, improve security, and increase access to capital markets. Banks, asset managers, infrastructure providers, financial technology companies, and others have invested in building the technical capacity to digitize financial assets and introduce DLT to processes. Firms have tested a wide range of proofs of concept, and many have released applications or conducted live transactions involving tokenized bonds and equities. Around the world, these institutions have begun to prove viability for a future where part of the value chain for a wide range of securities could migrate to blockchain and related technologies. 

Developments over the past decade have resolved some technological constraints to broad use of DLT in financial markets. In particular, technical coordination across industries and sectors has led to protocols and standards that could allow for interoperability between different systems. Newer protocols have also eased concerns around reliability and security, though key technical questions remain open, potentially limiting DLT’s usefulness. 

Recently, several models have emerged for future market structures. In some countries (e.g., Australia and Thailand), infrastructure providers and industry groups are actively planning the digitalization of specific asset classes, bringing together relevant market participants to map out the transition. In other jurisdictions, institutions are exploring different models (e.g., different technologies, degrees of vertical integration within the value chain, and roles for banks and infrastructures) through joint ventures and other collaborative projects. In some markets, direct competitors to existing structures have emerged. 

While the technology has matured greatly since Bitcoin was introduced in 2009, significant debate remains around the use of DLT in capital markets. This initiative will convene banks, asset managers, financial technology companies, market infrastructure providers, regulators, and other experts to explore a range of questions, including: What are the highest-value use cases for DLT, taking into account technical limitations and learning from ongoing experimentation? What are the unique risks posed by this new technology? How might specific use cases affect market structures? How would new DLT applications interact with broader market trends? What kinds of industry coordination would be needed to make technology transitions possible? What kinds of policy and regulation are needed to ensure any transition is smooth, secure, and ultimately beneficial to the real economy? 

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