Canadian Trifecta Successfully Tests Blockchain Securities Settlements
Securities transactions facilitated via the blockchain may be an ubiquitous norm in the not-so-distant future. That steady march toward the mainstream continues as the Bank of Canada, TMX Group, and financial security non-profit Payments Canada have just successfully tested a blockchain-backed securities settlement platform.
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A New Way for Instant Settlements?
Tokenizing securities is commonly touted as one of the most promising use cases for distributed ledger technologies.
Canada’s central bank, the Bank of Canada, teamed up with Payments Canada and the TMX Group Limited — owner-operators of the Toronto Stock Exchange — in what’s being touted as a “successful” test of such settlements-minded digitization.
The pilot test involved the three organizations creating an “integrated securities and payment settlement platform […] to complete an instant settlement,” per Reuters.
Payments Canada CEO Gerry Gaetz sounded optimistic in the aftermath of the testing, noting the contrast with the status quo:
“This shows that it is possible to deliver payments in a way that has never been done before – by directly swapping cash from buyers to sellers, resulting in instant settlements.”
A Dash of Cold Water
The pilot was a novel and interesting one, to be sure.
However doubts were cast about the usefulness of a blockchain settlement platform by Bank of Canada Senior Special Director Scott Hendry this week, who posited during a May 10th talk that benefits from a DLT system might not be uniform:
“We’re still uncertain after doing this work that there are significant savings possible for participants. It’s not clear that all the participant dealers and banks are going to get a significant benefit out of this settlement system.”
Even with that said, Hendry’s Bank of Canada is still testing blockchain solutions, showing that the bank’s leadership is open-minded enough to be proven wrong.
If Security Tokens Do Take Off, Could Be Huge
As Morgan Creek Blockchain Capital partner and tokenization’s high priest Anthony “Pomp” Pompliano routinely argues on Twitter, we may be on the cusp of the next step in the evolution of financial instruments like securities:
Compliance in tokenized securities is enforced at the protocol level.
This removes hundreds of millions of dollars in wasteful expenses from our legal system. Regulators can finally be proactive, rather than reactive.
It's 2018. It's about damn time.
— Pomp 🌪 (@APompliano) May 11, 2018
He’s bullish on the pace of this evolution, thinking that the security token use case will explode in the coming months — even beyond the popularity of already dominant utility tokens:
Security token market cap eclipses the utility token market cap in 24 months.
— Pomp 🌪 (@APompliano) May 11, 2018
“Blockchain changes the way we transport things in the digital world,” Pomp says. And it’s an excellent point, and maybe a revolutionary one, if the Digital Golden Age continues forth at its current rate.
Blockchain is to the next 150 years what the combustion engine was to the last 150 years.
One changed the way we transported things in the physical world. Blockchain changes the way we transport things in the digital world.
Don't miss out on the revolution. 🚀
— Pomp 🌪 (@APompliano) May 12, 2018
As always, in the mean time we can only wait patiently and see where we go from here. If Pomp’s right, though, then securities settlements via blockchain really will be ubiquitous in due time.
What’s your take? Do you think securities tokens will become bigger than utility tokens, or do you contest that line of thought? Let us know where you stand in the comments below.
Images via Toronto Star, Clarksons