Review: Secret success of the blockchain in the financial services sector

Why 2019 was a success for blockchain in the financial services market

With the end of 2019, a whole decade has come to an end. Accordingly, a consensus has emerged on the trends of the coming year. Nevertheless, last year did not bring the hoped-for breakthrough in the blockchain market for many experts. However, there have been some relevant developments in the area of ​​enterprise blockchains as well as in the area of ​​digital assets – especially in financial services. Basically, it can be said that the latest blockchain projects are of high quality and that the financial services sector is facing a bright future. Below you will find out why 2019 laid the foundation stone for the further adaptation of the blockchain in the financial sector.

 

Successes in the financial services sector in 2019

Looking back at 2019, many of our readers expect controversial projects such as Libra from Facebook, the Interbank Information Network (IIN), the JP Morgan Stablecoin, Intercontinental Exchanges Bitcoin Futures Bakkt, the announced digital currency of the European Central Bank and the CBDC of the Chinese Central Bank , However, there were also other projects that started successfully and then tacitly and continuously delivered positive results.

These outstanding projects include the work of the Australian Stock Exchange (ASX). The ASX is actively working to replace its existing CHESS system. The successor will be the distributed ledger technology provided by Digital Asset. The new system is intended to improve clearing and settlement processes. So far, the development has ensured that DAML is used without major problems. As a result, the project always achieves the targeted milestones within the set deadlines. Further tests in the industry should take place this year.

 

Stablecoins dominated the reporting

A closer look at the trends in blockchain projects shows that 2019 was the year for stablecoins, payment networks and digital infrastructures. Facebook presented the ambitious and controversial Libra payment network. The Libra Association initially won 27 well-known cooperation partners and increasingly became the focus of politics. Due to media interest, some of the largest partners, including PayPal, Visa and MasterCard, withdrew. The companies simply wanted to escape the political regulatory pressure.

In the meantime, the publication of Libra has become a regulatory barrier. Nevertheless, Facebook is within the time window for the development of the Calibra Wallet. As a result, it is possible that Calibra 2020 will come on the market and support other stablecoins such as USDC.

Financial services sector needs solutions for compliant storage of digital assets

Digital assets have become increasingly interesting over the past year. An existing challenge is the lack of a standardized infrastructure for institutional investors, which enables the regulated and compliant storage of cryptocurrencies.

For this reason, important market players such as Fidelity Digital Assets or Bakkt, a company financed by ICE and the NYSE, entered the market in 2019. Unlike other custody services, these new competitors can ensure that digital assets are kept safe and compliant.

Startups like Trustology have also tried to gain market share in a highly competitive market. Traditional asset managers like State Street, Northern Trust or Vanguard are considered slow to develop new products, solutions and partnerships.

 

Immediate transactions are changing the financial services sector

Private customer business is also changing. As more and more companies rely on the automation of processes, banks are starting to fundamentally change the business model. In this way, transactions, reconciliations and transaction reviews should become more transparent. In 2019, stablecoins and CBDCs have emerged as the means of choice in these developments.

Projects such as the JPM Coin, which has won important cooperation partners such as UBS, Barclays or BNY Mellon, show interest. A classic digital currency should reflect the value of a classic Fiat currency and thus introduce immediate and smooth transactions. Here, the transparency and traceability remains readily available. The IIN service plans to integrate more than 365 banks on its own platform.

 

China advises technological leadership in blockchain

At the end of 2019, Chinese President Xi Jinping caused a stir when he manifested blockchain as a key technology in the People’s Republic. Rather, Jinping announced its own digital currency and the focus on numerous blockchain initiatives. As a result, new pilot projects and consortia quickly emerged. Venture capitalists also released new capital to the market.

The government’s message couldn’t be clearer because the country wants to be a pioneer in the blockchain sector. Europe also ruled quickly and announced its own EUROchain project. More than 18 central banks are now considering launching their own digital currency project.

 

Conclusion: Financial services sector is making progress on blockchain

In summary, it can be said that 2019 has been a very positive year for blockchain in the financial services sector. A direct comparison with other sectors such as healthcare or insurance shows that the financial services sector has great potential. As a result, progress is becoming ever greater and more significant.

Nevertheless, it remains to be said that there are still many opportunities that have not yet been implemented. The potential of this economic sector remains correspondingly large. However, a closer look at the market participants shows that the course has already been set for success – 2020 can come.

Personally, I expect significant breakthroughs in the financial industry in the coming years. This sector is still chasing its own ambitions. Financial transactions are still considered stale and manual. Accordingly, I see greater potential for optimization in the financial market.