Using blockchain as it was intended to make debt issuance more efficient
- Jul 14, 2021
- 2 min read
Using blockchain as it was intended to make debt issuance more efficient
As blockchain technology emerges from the Trough of Disillusionment (© Gartner) and ascends the Slope of Enlightenment (© Gartner) the original promise of what it can deliver once it reaches the Plateau of Productivity (© Gartner) is being rediscovered.
Capexmove, a London-based business applying blockchain initially to the debt markets, emphasises the savings in external and internal reconciliation, internal controls, internal audit and regulatory compliance as the various parties start to work off a single source of information that is always up to date. Reliance on smart contracts to automate asset servicing and compliance checks delivers further economies. Cuneyt Eti, co-founder of Capexmove, told Dominic Hobson how the Capexmove debt tokenisation platform saves issuers, investors and intermediaries time and money.
Questions that are being asked
What is a smart contract (SC) and how they differ from legacy infrastructure?
Advantages (from cost/time/risk perspectives) of using blockchain/smart contracts within financial institutions (*quickly listed some, but can tidy them later on)
○ Having fewer intermediaries ○ Less friction within operations as SC triggers actions automatically ○ Less need for data reconciliation ○ Stakeholders having access to a single and up to date database during the life-cycle of transactions. This also removes the need to maintain legacy databases ○ Opens the potential for financial institutions to serve untapped markets (e.g. SME bonds) ○ Creating an almost perfect audit trail ○ Better enforcement of regulation ○ Using smart contracts for automated reporting
Potential challenges of utilising smart contracts
○ Handling contract disputes ○ Currently, legislations not being mature enough ○ There are still not enough real-life cases to which we can refer/analyse ○ Privacy concerns ○ Interoperability
