The cryptocurrency Bitcoin has had a major impact on the global financial markets in recent years, and in particular the foreign exchange markets. The wildly fluctuating value of the digital currency has had a knock-on effect on many markets, but it is the blockchain technology underpinning the currency that has the potential to alter the foreign exchange industry permanently. Thibaut de Roux follows innovations in blockchain technology and has an interest in the potential of blockchain to impact financial markets and services across the world. The short video attachment looks at the origins of Bitcoin.
Decentralising the Market
The global blockchain technology market is undergoing a period of almost exponential growth. Valued at approximately $210 million in 2016, experts predict the blockchain market will reach a value of $2.3 billion by as early as 2021. By the following year, some predictions place the blockchain market value potential as high as $7.68 billion. In terms of the foreign exchange industry, or FX, blockchain provides a unique opportunity to decentralise the keeping of records and therefore securely increase the availability of stored information. An overview of the FX industry today can be seen in the PDF attachment to this post. Through decentralising records of information, whether they are about currency prices, transactions or any other amount of relevant data, blockchain has the potential to unlock more power for start-ups and smaller traders. Small companies and individuals will see new and exciting opportunities for peer-to-peer lending and exchange, among other things, which removes the need for these businesses and individuals to deal with the larger banks and financial institutions.
The infographic attachment details come of the biggest venture capital investments in blockchain technology.
Improved Security
Blockchain further has the potential to take security within the FX markets to a whole new level. Sensitive data contained in blockchain ledgers is virtually impossible to hack or to falsify, resulting in a simple yet effective security system for all transactions. One of the biggest challenges facing the global economy and in particular the finance sector is cybersecurity. Introducing blockchain could change the game in terms of security in a big way.
Minimal Transaction Costs
Another way in which blockchain could revolutionise the financial industry as a whole is through the minimal transaction costs involved. Many financial institutions make their money by charging customers a fee for the privilege of facilitating each and every financial transaction. These institutions will be forced to make fundamental changes to the way they operate once blockchain removes the need for transaction fees to ensure security. Many of the services currently offered by banks and financial institutions will become obsolete once blockchain is fully implemented across the financial services industry.
Major Blockchain Players
Many of blockchain innovation’s biggest players are involved in the financial sector and in particular the FX market. Big names such as Atlas Cloud Enterprises and 360 Blockchain are already involved in developing innovations on the platform, making access to blockchain more widely available to a variety of different industries. Much of this innovation is targeted at security and cryptocurrencies, which will undoubtedly result in major impacts on global markets such as the FX market. The likelihood is that, as blockchain continues on its growth trajectory, it will be increasingly adopted by the world’s largest and most influential financial institutions and banks. This will alter the way the FX market operates permanently, opening up new opportunities for individuals and for businesses of all shapes and sizes. The FX market will become more open and more efficient as blockchain becomes more prominent.