Distributed ledger technology (DLT), which facilitates simultaneous access, validation and record updates in an immutable manner, is gradually becoming mainstream in financial services.
Recognised primarily for its application in cryptocurrencies (crypto), DLT’s extensive potential beyond is now coming to the fore.
Though regulators remain sceptical about crypto, which also faces other market-related headwinds, they are largely positive about the use of DLT infrastructure in the larger financial services space.
For instance, in April 2024, the Bank of England and the Financial Conduct Authority (FCA) jointly released a draft guidance on a digital securities sandbox.
This sandbox allows firms to test DLT in a controlled environment — across financial market processes such as securities settlement — under regulatory oversight1.
Indeed, the benefits of DLT can span the entire banking value chain — enabling data transparency and accuracy, and efficient transaction processing and verification; eliminating the need for a central authority; guarding against manipulation; and optimising know-your-customer (KYC) processes.
Moreover, DLT offers substantial savings on infrastructure, transaction and administrative costs across the trade lifecycle.