Financial Services: The Coming Cataclysm

Blockchain is the first native digital for value: we can use it to program virtually every asset under the sun.

In this section, we are going to focus on digitization of existing financial assets in the form of securities tokens and fiat-backed stablecoins.

Open finance refers to the opening up of traditionally closed, analog, and proprietary systems to blockchain and digital assets.

The global "Stock market" is really a loosely knitted patchwork of local and regional exchanges, banks, broker dealers, custodians, clearinghouses, regulators, asset managers, fund administrators and other market participants and intermediaries.

Are transaction costs high, spread too wide, or are other barriers so prohibitive that market participants choose to avoid the asset class altogether?

If the answer is yes to a majority of these questions, then the asset is a likely candidate for securities tokens, and a highly fragmented market should make experimentation or innovation easier.

Anthony Pompliano, co-founder and partner at Morgan Creek Digital, believes that securities regulators "Took the idea of the rich get richer and wrote it into law. They took the best performing assets with the best returns and put them behind a firewall." He was referring to the Securities and Exchange Act of 1933, which limited many investment opportunities to high-net-worth individuals.

The lines defining "Financial services" will begin to blur as everything becomes an asset and everyone becomes a market participant.

Marley Gray of Microsoft, who is a key contributor to the EEA's Token Alliance, told us that common standards "Remove the obstacles for defining assets. Blockchain should be just like using the payments network today. People should just use it." He added, "You don't need to understand the blockchain to use tokens. Let's get to the point where we are actually driving business value. Let's abstract this, make it common. Commoditizing tokens so any industry or company can create them."

The potential is very significant for these tokens to enable new economies around assets that were either previously in the commons or captured asymmetrically by a few large technology intermediaries.