With a lot of heritage architecture in financial markets, the interaction between traditional and emerging technology is important for large firms and the market as a whole, according to Justin Chapman, Global Head of Digital Assets and Financial Markets at Northern Trust.
He said that the adoption of blockchain technology is picking up, but “it hasn’t been epic”.
The underlying technologies are crucial for immutable and trustable data that also allows users to streamline processing transaction volume, liquidity and flow, Chapman said.
“The challenge at the moment is getting the adoption scale, which would bring more liquidity to the model,” he said.
According to Chapman, Northern Trust has done several different use cases, and has gone live with a number of products, but the wider adoption hadn’t grown to the extent that was expected.
“As we have developed digital assets over the past eight years our focus has been around reusability. The trick is not to lose the benefit of the digital side as you integrate with more traditional rails,” he said.
Chapman said the goal is making sure that real value gets to the endpoint as quickly as possible.
“That’s quite a trick and it has to be built into the architectural refresh of the organization,” he noted.
Chapman thinks there will be an exponential curve over the next two or three years, when there will be more digital asset solutions coming out.
“The adoption curve is certainly improving and I think we will start seeing more use cases come out. But we still think we’re probably five years away from actually seeing the full potential,” he said.
According to Chapman, the digital asset space is really looking at how to enable the transfer of data from the issuer to the end investor more quickly, with transparency that allows for more investable insights, as well as people being able to trust the information that sits in between.
“We’re pretty proud of our progress using the technology and we’re starting to see more opportunities coming in the market. You’re starting to see more players, creating real issuance and real capabilities, which is good news,” he said.
Chapman added that previously there’s been a slowdown because of the uncertainty regarding regulation, however “we’re starting to come through the other side”.
There has been a significant amount of regulation across Europe, Asia, and the US focused on digital assets.
A lot of this is also bleeding over to traditional assets, Chapman said, but it’s creating frameworks where market participants can operate safely within a regulatory environment that gives confidence to the end investor, rather than being in an unregulated environment.
“It allows you to deploy the technologies in the correct frameworks. Before that, it was really difficult,” he said.
“There’s a lot of government commitment and regulatory commitments to enable economies through digital assets and technologies,” he added.
Chapman thinks that the future is going to be “really bright” for certain digital asset applications.
“These are the things where you’ve got very nascent market structures and right opportunities,” he said.
