Ethereum Set To Replace Wall Street’s Aging Settlements Layer
Ethereum is arguably the most practical and efficient cryptocurrency and blockchain going. It has the biggest team of developers and the platform can host a multitude of different dApp types. And with DeFi it hosts the fastest growing sector in the cryptocurrency ecosystem.
This has revived institutional interest in Etheruem, and has led some to predict that Ethereum might even fully replace Wall Street’s ageing backend and become the full settlements layer for legacy financial system.
How Could Ethereum Replace Wall Street’s Settlements Layer?
Ethereum is a decentralized smart-contract platform with a multitude of potential use cases, and with the financial infrastructure creaking at its ageing backend, institutions desperately need a new, fluid technology like Ethereum to keep up.
Ethereum has been trialed by institutions. Recently, a $40m bond was issued on Ethereum as part of a capital infusion into the Fatburger restaurant brand.
While $40m isn’t huge in Wall Street terms, the company that structured the deal has many more projects in the pipeline, and they intend to raise more than $500m by the end of this year.
In another sign of confidence in Ethereum credit ratings firm DBRS Morningstar rated a security issued on a blockchain for the first time ever. The security is coded into a smart contract on the Ethereum blockchain. These securities are “digital representations” of ownership, coded via smart contracts.
This is a significant step and it shows the institutions are watching the space. A blockchain based security will not only secure the ownership of a security, but the open ledger is there for anyone to keep track of the securities’ performance, how much it pays in dividend, which will automatically drop into the holders’ Ethereum wallets.
It’s no secret Wall Street and the financial industry at large needs a shake up. The setllements layer Wall Street uses is archaic, and blockchain and Ethereum is perfect for it to advance.
Institutions will be keeping an eye on the performance and capabilities of blockchain based securities. No doubt, when they see the benefits, more will move towards it and I believe we will see a full transition, of every bond, stock and tradable asset tokenized. Watch this space.
Author: Tommy Limpitlaw