There is an urgent need for talents who can understand both blockchain and capital markets

Baozou Comment : This is a very pertinent research report, which raises several issues that have not been deeply explored in the past. For example, if blockchain technology is to be integrated into financial institutions, a large number of professionals with a deep understanding of both technology and finance are urgently needed; and how to deal with the traditional financial infrastructure that has already invested tens of billions of funds. It is obviously unrealistic to completely abandon these facilities. The key is how to integrate with the existing financial infrastructure and give full play to the advantages of blockchain, otherwise it will face huge resistance; in addition, there is no definite example to prove whether blockchain can handle trillions of funds and assets every day, which requires the industry to explore hard.

For capital markets, the question is no longer whether to explore blockchain technology, but how to explore it, a new report suggests.

The report, from research and consulting firm Aite Group, examines the corporate finance sector's interest in emerging technologies. The report was released in late December and is based on technology and corporate interviews conducted between June and August 2015.

However, despite the industry’s optimism about the technology, the report points out at least six challenges in the market’s adoption of the technology, including, perhaps most importantly, the fact that legacy systems are already very powerful and there is a lack of expertise in new areas.

Written byGabriel Wang

Author Gabriel Wang found that there is currently an “extreme shortage of talent” and that there is a need for people who can understand both blockchain technology and the capital markets. The author said,

“The market is desperately looking for talent who can bridge the two worlds. They need to be able to implement blockchain technology in the real world and in the capital markets to achieve better functions.”

The announcement comes at a time when capital market participants, including Nasdaq and the New York Stock Exchange (NYSE), are moving toward the new technology, either as proof of concept or through strategic investments.

Furthermore, Wang said that blockchain technology could potentially replace the IT infrastructure of these companies, and stressed that “tens of billions” of dollars have already been invested in the construction of such infrastructure.

Wang mentioned,

“If blockchain technology cannot be combined with the existing system to play a greater role, it will become a huge obstacle to the adoption of the technology in the entire capital market.”

Other challenges cited in the report include high energy consumption in some blockchain systems; a lack of clarity in the regulatory environment around the technology; and questions about the technology’s scalability and latency.

Wang noted that there are still many questions about whether blockchain-based systems can handle nearly one million transactions per day, and questioned whether it can be compared with the controversial bitcoin, which is currently under intense debate among blockchain enthusiasts about how to improve its processing capacity of seven transactions per second.

Save billions

Still, Wang noted that blockchain could save businesses millions, if not billions, of dollars in costs, even without disrupting existing IT systems, primarily by automating current paper-based processes.

However, he noted that the total amount of savings that could be achieved is difficult to determine without the existing technology being deployed and having use cases.

He wrote,

“There is still a huge question mark over how much money is needed to build a blockchain platform powerful enough to handle the trillions of dollars that the capital markets ecosystem faces every day.”

After giving four key market trends, Wang concluded that investment is here to stay.

Wang cited the push for financial transparency following the financial crisis, which resulted in skyrocketing costs for compliance, pressure to cut IT spending, and attempts to change existing systems that have become archaic as the main drivers for why institutions are interested in the technology.

Overall, Aite Group plans to invest $130 million in blockchain technology in 2016 and perhaps $400 million in 2019.