Nasdaq CEO Adena Friedman Outlines 3 Ways Blockchain Can Fix Finance

Nasdaq CEO Adena Friedman sees blockchain reshaping the normal monetary system in three key methods: by overhauling post-trade infrastructure, unlocking trapped capital by higher collateral mobility, and enabling quicker, extra seamless funds.

“There’s a lot capital tied up, whether or not it is in clearinghouses or clearing brokers,” Friedman stated Tuesday throughout a name with Ripple President Monica Lengthy on the Swell convention in New York. “If we do it proper, we are able to truly flip this into a possibility to ship extra capital to the system.”

Put up-trade processes – the techniques that full and settle securities transactions – stay deeply fragmented and sometimes depend on decades-old infrastructure. Friedman famous that whereas a number of the complexity is intentional, typically for causes akin to danger administration or allocation monitoring, a lot of the friction is pointless. She believes blockchain will help unify and streamline these workflows, lowering the inefficiencies that tie up capital and sluggish monetary exercise.

The second main alternative lies in bettering how monetary establishments transfer and handle collateral – the property pledged in commerce and credit score transactions to mitigate danger. In line with Friedman, digital property might make it simpler to shortly transport collateral throughout platforms and borders. “What we actually like concerning the thought of ​​digital property is the flexibility to maneuver that collateral,” she stated. “We are able to create an extra mobility effort and … liberate numerous capital.”

Funds are the third space ripe for change. Though Nasdaq will not be within the funds trade, Friedman emphasised that smoother, extra environment friendly fee techniques are essential to permitting traders to take part in international markets with out friction.

She described the present funds infrastructure as a bottleneck, slowing the move of capital. If these techniques might be improved or rebuilt utilizing blockchain, she stated, it might liberate important quantities of capital at present tied up in outdated processes. That, in flip, would assist traders transfer their cash extra simply throughout platforms, borders and asset lessons, making the monetary system extra open and environment friendly.

Nasdaq has already began laying the groundwork. The trade operator just lately filed an utility with the US Securities and Change Fee to help buying and selling of tokenized securities. Below the proposed framework, an investor might flag a commerce for tokenized settlement, and the post-trade system – together with clearinghouse DTCC – would route it accordingly, enabling supply right into a digital pockets. This strategy, Friedman stated, maintains the core construction of present securities whereas providing traders extra flexibility.

She was fast to level out that the aim is to not change or fragment U.S. inventory markets, which she described as “extraordinarily resilient” and “extremely liquid,” however to strengthen them by integrating know-how that reduces friction and improves investor selection.

Tokenized markets could begin in post-trade capabilities, she stated, however might in the end reshape the best way securities are issued and traded. “Let’s hold all these nice issues [about the U.S. markets]after which let’s deploy the know-how the place we are able to truly cut back friction.”