A newly discovered institutional-grade report from banking giant HSBC labels the XRP ledger as a potential game-changer that could help “cut across corporate boundaries and existing market structures.”
The report is the latest in the company’s “game changers” series, and analyzes how distributed ledger technology (DLT) could lower costs and risks in the world of finance.
It cites the XRP ledger as a compelling application for DLT in the capital markets that central banks could use to power real-time transactions.
“DLT can streamline end-to-end value transfers, reducing costs, operational risks and settlement periods. For example, Ripple’s XRP ledger provides real-time cross-border settlements, using tokens that represent central bank currencies.”
As for the potential impact of DLT as a whole, the report cites a long list of potential applications for the emerging technology.
“DLT’s ability to establish a ‘single version of the truth’ allows it to cut across corporate boundaries and existing market structures. One of the most obvious applications for DLT is as a single asset register for an asset manager or broker-dealer. This ‘golden source’ would eliminate internal reconciliations, enhance capital efficiency and give clients or regulators controlled access to real-time data…
Even more ambitiously, mutually-operated ledgers could transform clearing, settlement and reporting for OTC securities and derivatives markets. That is the aim of Corda, an adaptable DLT platform created by the R3 consortium, of which HSBC was an early member. As well as transforming operational efficiency, such a ledger would release huge amounts of capital by reducing settlement periods and giving users a single view of the location and eligibility of collateral assets.”
HSBC says there are still hurdles on the path to widespread adoption of DLT, but it believes the technology will continue to grow in the years ahead.
“Of course, DLT is not going to replace current capital markets platforms overnight. Many practical hurdles to widespread adoption still remain to be overcome, as significant and healthy scepticism persists – a natural response to DLT’s technical complexities. Even so, we expect the next two years to see more and more organizations derive growing benefits from a range of DLT applications.
DLT will become an increasingly viable option in many firms’ technology toolkits. As adoption grows, more and more organizations will begin judging DLT on its commercial merits, rather than as a theoretical concept. In our view, every investment firm should take an active interest in DLT, even if they don’t wish – for now – to take an active role in development.
We believe the next few years will see DLT developments accelerate. As adoption grows, more firms will view it as a mainstream commercial proposition instead of a technical curiosity. Engagement with regulators, developers and other partners will become ever more important to overcoming potential obstacles.”
You can check out the full report here.