Decentralized Ledger Technology: The Future of Finance

Embracing the Blockchain Revolution

John Whelan, the brains behind Banco Santander’s blockchain lab in Madrid, recently shared some noteworthy thoughts on the future of decentralized ledger technology (DLT) in the financial sector. Spoiler alert: it involves a lot of buzzwords like ‘global settlement network’ and ‘permissioned layers.’ It’s a bit like trying to explain the plot of a Christopher Nolan film—impressive but slightly overwhelming.

Vision of a Controlled Framework

During a lively webinar hosted by Fintech Surge and the Future Blockchain Summit, Whelan painted a picture of a future where securities could operate within a highly regulated, private layer above a public blockchain. Sounds like a fancy restaurants’ secret menu, doesn’t it? You can’t see it until you’re in the know, but it holds delightful dishes (or in this case, transactions).

The Reality of Settlement Times

Don’t expect instantaneous transactions just yet. Whelan acknowledged that while public blockchain networks are impressive, they aren’t exactly the Usain Bolt of high-frequency trades. “Settlement is not something that has to happen instantaneously,” he said. Instead, financial markets typically experience a T+5 settlement—meaning five days post-trade to wrap things up. It’s a bit like waiting for your Netflix show to buffer, but with a lot more money riding on it.

Room for Improvement

Whelan’s vision includes creating a world where blockchain can streamline these settlement processes. Imagine a magical realm where the often tedious T+5 could transform into T+0! Stakeholders across the financial landscape are eager for this transformation, seeking a reduction in the settlement throughput that currently plagues conventional finance.

Regulated DeFi on the Horizon

Whelan’s thoughts also ventured into the land of regulated decentralized finance (or “reg-DeFi”). He believes we’re nearing a time when blockchain-based tokens, like ERC-20, will become viable in mainstream finance. This aligns perfectly with Rune Christensen, CEO of MakerDAO, who recently said that DeFi needs regulatory clarity to break free from its bubble and integrate into the broader financial fabric.

Milestones in Digital Bonds

In an exciting nod to progress, Whelan shared that Banco Santander was among three banks selected by the European Investment Bank (EIB) to issue a €100 million digital bond. This bond is even cooler because its legal record of ownership sits pretty on the public Ethereum blockchain. Meanwhile, Societe Generale joined the party with a security token on the Tezos blockchain. While everyone’s busy cheering for blockchain tech, the digital bond market is shaping up to be quite the spectacle!