It was not so long ago that the financial sector was abuzz with enthusiastic tales of how distributed ledger technology or blockchain was about to profoundly change the global financial services architecture. In particular, major wholesale and investment banking activities were allegedly about to be transformed. The technology would usher in increased efficiency and productivity, greater connectivity, and better risk management. Consultants, technology firms and financial institutions launched a panoply of projects in back office, settlement and reconciliation activities; trade finance; asset trading and securitisation; cross border payments; tokenised and stablecoin based payment and settlement systems; and smart contracts. Major use cases, such as the JPMorganChase coin or projects Ubin and Jasper, seemed to herald a rapid realisation of this potential. And then it went quiet. Was this another technology flash in the pan, where alluring prototypes crashed into market reality, or simply a phase of reflection after initial experimentation?
In this edition of the DMI Journal, we take stock of the rapid development of wholesale DLT applications in the financial sector, assess growing central bank interest in the field, and the possibilities for a wholesale central bank digital currency.