Nasdaq Vice President of Blockchain Innovation: Mainstream adoption of blockchain technology in capital markets is inevitable, but it will take time

Fredrik Voss, vice president of blockchain innovation at Nasdaq, believes that mainstream adoption of blockchain technology in capital markets is promising and inevitable.

When it comes to the development and implementation of blockchain-based platforms, the vast majority of financial institutions and banks that are actively exploring the potential of blockchain technology are struggling to establish a clear vision and roadmap.

Sense of urgency

In the financial sector, the application scope of blockchain technology that can bring about real changes and innovations is relatively limited. Capital and stock markets are two areas where blockchain technology can succeed in traditional banking and finance, because these two areas will rely on the immutability and transparency of blockchain technology.

The key to operating or promoting an efficient stock or capital market is transparency and automated trading. Stock markets, such as Nasdaq, are actively and urgently experimenting with blockchain technology because they are in urgent need of a basic protocol or platform to eliminate human costs, manual operations, and opaque operational processes.

Various projects, including Counterparty and Overstock’s T-Zero, have demonstrated the potential of blockchain technology in capital markets. In particular, Overstock’s T-Zero has successfully tested and deployed a blockchain-based capital markets platform with greater transparency, efficiency, real-time settlement, and auditability.

Still in the early stages

As Voss said, platforms like T-Zero or blockchain technology in general are still in a very early stage and far from commercial implementation. Developers and researchers are still figuring out how blockchain technology can be implemented to gain mainstream adoption in capital markets. Developers still have to overcome some hurdles, such as regulatory conflicts and security issues.

Voss said:

“Blockchain technology still has a long way to go before it can achieve mass adoption in capital markets, but the prospects for blockchain are much better now than they were three years ago.”

Currently, the structure of capital markets and stock exchanges is unnecessarily complex and ambiguous. It is difficult for traders to track their holdings in a particular company, and there are no tools or a real-time settlement network that can effectively prove a trader's ownership of a company's shares.

By implementing blockchain technology in the capital markets, Voss hopes to see increased transparency, especially in the process of lending or selling stocks or ownership. Voss said:

“Using blockchain technology, if you hold shares in a company, you will be allocated tokens equal to the value of your shares, and then you can transfer the tokens to someone to vote on your behalf. We can track the whereabouts of those votes. If you are a proxy, it is currently difficult to prove to the person who delegated the votes to you that you voted according to their instructions.”

Recently, Nasdaq and the Voss team have begun to feel more optimistic about blockchain technology and blockchain development than when they first started to engage with blockchain technology three years ago.

Voss is particularly enthusiastic about blockchain technology and is helping Nasdaq and other market participants evaluate various operations and analyze their efficiency.

Voss also said:

“Blockchain technology is also enabling market participants to talk to each other about some of the collective causes, such as are we happy with our post-trade infrastructure? Are we happy with the transparency we provide to regulators? … This technology is really encouraging financial markets to look at some of the issues that exist in a new light.”