Impact of Blockchain on Capital Markets and Why Governments Would Use It.
I believe that the integration of blockchain into the space of markets, in particular securities trading, would facilitate KYC and tax filing process, allow transparent market transactions, expedite securities ownership transferral process, advance liquidation of public securities with lowered commission and markups charged by broker/dealers, and ultimately promote an efficient market environment with stricter regulatory compliance through the help of blockchain.
Our current KYC compliance requests tend to delay transactions, taking 30 to 50 days to complete to a satisfactory level. Since penalties for failing to follow KYC guidelines properly are high, financial institutions are required to spend high annual compliance costs. However, the use of blockchain-based registry would speed up the KYC process, reduce associated costs, and further prevent fraudulent activities. Customer identity and records that are put on blockchain will allow financial institutions to quickly determine customer’s reliability and trustworthiness.
When all market transactions are recorded and made publicly available on the blockchain, regulators will be capable of seeing all real-time transferral of security ownership and determining how much each individual owes in taxes. “Because of the way the blockchain works, you can effectively, instantaneously transfer complete ownership and title to the shares without having to wait the laborious 3 day process the markets currently labor on. Some say it could be done in less than ten minutes, considering the average bitcoin transaction confirmation time.
With the emergence of blockchain-based registry and recorded data of all real-time market transactions, the KYC process and transactions of securities will be completely automated as soon as these two publicly distributed ledgers are in place. Once complete automation is in place, the commission and markups charged will be lowered dramatically since labor is now reduced to mere automation. [“The real potential lies in this (blockchain) technology as a capacity to remove middlemen from all sorts of exchanges and other aspects of the economy.” — Michael Casey] (http://www.wsj.com/article_email/a-bitcoin-technology-gets-nasdaq-test-1431296886-lMyQjAxMTE1MzEyMDQxNzAwWj)
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