DLT-Powered Financial Markets Could Save $100B Per Year, TradFi Study Says

Using distributed ledger technology (DLT) in securities markets could create savings north of $100 billion per year, a report produced by a major traditional-finance lobby group has said.

In a report published Tuesday evening, the Global Financial Markets Association (GFMA) called for regulators to allow the technology that underpins crypto to aid collateral management, asset tokenization and sovereign bond markets.

“Distributed ledger technology holds promise for driving growth and innovation,” said Adam Farkas, Chief Executive of GFMA, whose affiliates in the U.S., Europe and Asia count major players such as JPMorgan Chase, HSBC and Nomura among their members.

“This potential should not be ignored or prohibited where regulatory oversight and resiliency measures already exist,” Farkas added, calling for a harmonized international framework to let DLT-based markets link up.

Freeing up collateral outstanding in areas like derivatives and securities lending could save over $100 billion per year in financial resources from a market worth some $19 trillion, and using smart contracts to automate settlement and corporate action processes for stock splits and mergers could mean $15-20 billion lower operational costs, the report said.

The study reflects growing enthusiasm for using DLT from traditional finance players.

Euroclear, a Brussels-based firm specialized in clearing and settlement, is set to release a new platform for DLT bond trading shortly, and the European Central Bank is looking at how to make its financial settlement systems better interact with the decentralized technology.

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