Corporate Finance News

Mardi 10 Mai 2016

Your margin is my blockchain opportunity

We have paraphrased Jeff Bezos’ famous aphorism because it’s relevant to blockchain tech, especially now that Amazon’s Web Services unit has made its first official foray into distributed ledger projects.

Meanwhile, financial institutions are enthusiastically participating in consortia in an attempt to “own” blockchain tech’s advancements in settlement, custody and trade finance, among other activities. While we understand the urge to collaborate, we think that it will be difficult for any consortium to achieve Amazon-level success.

For now, it’s reassuring for financial institutions and their shareholders to work closely with the likes of Ripple, Chain, Digital Asset Holding, R3, Digital Currency Group, aeDeus and others. But that’s in part to fend off a Silicon Valley type of disruption that would “steal” standard-setting from incumbents. Over the intermediate term, we think blockchain coopetition will give way to a more traditional competitive dynamic.

Our reasoning is predicated on the belief that while blockchain tech will produce sizable efficiencies and transparencies that will save money and free up capital, it will also put downward pressure on margins in many cherished business lines. That, in turn, will create added pressure on weaker firms and open up opportunities for the strong to leverage scale and technical superiority. Amazon didn’t get where it is by being cooperative with its rivals; why would the world’s leading financial services firms act any differently? Or, to put it another way, what’s the point of being huge if you can’t use your hugeness to your huge benefit?

To catch up on the state of blockchain tech in financial services, download below this Morgan Stanley report.

Since its launch in December 2015, The FR has sought to provide readers with sharp and distinctive commentary on the most important financial innovation trends and news.

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