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Embracing blockchain for Seamless Securities Transfers: Reflections from the Past

Disclaimer: The views and opinions expressed in the vapa Swiss independent wealth management blog posts featured on this page are solely my own and do not necessarily represent the views of any institutions or organisations I may be associated with. These posts are intended to share personal insights and perspectives and should not be interpreted as official statements or positions of any affiliated entities.

I vividly recall my days as a Back-Office employee at Citicorp Private Bank in Zurich (today Citigroup), where I immersed myself in the intricacies of the swift system. While trading instructions were relatively straightforward, complete portfolio transfers presented a significant challenge. Coordinating numerous phone calls with correspondent banks and clearing organisations was the norm in those pre-email days. Nevertheless, we managed to navigate the complexities and make it work.

Fast-forward to the present, and I still view the Delivery Versus Free (DVF) settlement mechanism with a certain degree of scepticism. It still appears to be a persistent challenge within the industry. Smaller banks often rely on bigger banks, which, in turn, collaborate with custodians and clearing organisations. For a fully diversified global portfolio, this can entail working with multiple custodians, adding layers of complexity for back-office teams at different levels. Despite some streamlining efforts, the process remains far from straightforward.

However, a glimmer of hope is on the horizon—a potential solution that could revolutionise securities transactions: Blockchain Settlement. By leveraging the power of blockchain technology, we can address the longstanding issues surrounding settlement times and associated risks. Today, even traditional securities trades can take days to settle, exposing market participants to volatility and operational uncertainties. With blockchain settlement, these concerns vanish as the process becomes instantaneous.

The Impact of Blockchain Settlement and Regulatory Evolution

Blockchain settlement can revolutionise securities trades. Transaction information, including ownership transfer, is securely recorded on a distributed ledger—blockchain. Investors (or for the sake of custodian banks) communicate directly through a decentralised peer-to-peer network, eliminating intermediaries and reducing risk. The transparency and immutability of blockchain foster trust and efficiency in securities transfers.

Regulation plays a crucial role in widespread adoption. Collaborative efforts between stakeholders and regulatory bodies establish a robust framework, ensuring compliance, investor protection, and innovation. By embracing this technology, we revolutionise the securities industry, unlocking efficiency, cost savings, and market stability.

Let’s reimagine the future of securities transfers, leaving behind the days of laborious processes and introducing a new era of efficiency, transparency, trust and less headache.

Source: LinkedIn

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Blockchain technology transforming securities transfers: A journey from past challenges to a seamless future.

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