Total expenditures for blockchain use for capital markets are expected to top $1 billion this year, Greenwich Associates said in a report.
The spending, primarily by banks, central counterparties, brokers and exchanges, are intended to help them find uses for blockchain, or distributed ledger technology, which could allow for direct peer-to-peer transfer of assets without the use of a third party or the Internet.
Among the 134 firms with current blockchain initiatives surveyed for the report by Greenwich, 32% have an annual distributed ledger technology budget of at least $5 million and 15% have budgets of between $2 million and $5 million.
While 59% of overall respondents said they were extremely or very focused on distributed ledger technology, among money managers, 36% said they were “not at all focused” on blockchain with none extremely focused and only 14% very focused, Greenwich said in the report, “Blockchain Adoption in Capital Markets.”
Seventy-three percent of survey respondents said they expect blockchain development to reduce operational costs, while 69% expected it to shorten settlement times. Also, the use of “smart contracts,” computer protocols that facilitate, verify or enforce the terms of a contract, were seen as most promising in collateral management, according to 45% of respondents, and over-the-counter derivatives, at 43%, was the next most promising.
Vested interest in existing technology was seen as the biggest impediment to blockchain adoption, according to the report.
“A number of respondents expressed the belief that a move to DLT could add unquantifiable benefits such as being a catalyst for industry transformation, creating new value chains and new markets, and improving regulatory compliance, transparency and information sharing,” said Richard Johnson, Greenwich vice president, market structure and technology, in the report.
The survey was conducted in March and April. Thirty percent of respondents were banks; 29%, blockchain developers or technology vendors; 15%, consultants; 10%, money managers; 9%, exchanges; and the rest were central counterparties.