Blockchain Securities Lending Marketplaces: Can They Succeed?

Finadium
February 2018

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Interest in blockchain and Internet Coin Offerings (ICOs) is in the air, and market disruption is encouraging the idea that securities lending on the blockchain is a potential game changer. The securities lending market isn’t like other markets however, and there are structural and cultural obstacles that blockchain proponents must consider before declaring a path to victory.

In this report, we consider the technological and business challenges of moving securities lending to the blockchain, including tZero as a test case. We evaluate whether a move to the blockchain would help solve current problems in the securities lending market or whether this is just a shift to a newer technology stack with equivalent functionality. We ask whether it is start-ups or incumbents that should be running blockchain securities lending platforms and what this means for the industry. We find that while there may be some genuine benefits to blockchain securities lending platforms, there are also tangible hurdles.

This report has been written for market participants in securities finance to better consider the implications of blockchain in this marketplace.

Table of Contents

  • Executive Summary
  • The Blockchain Model of Securities Lending
    • – The Case Study: tZero
    • – Blockchain for Securities Lending of Cryptocurrencies and ICOs
  • What Problems Does Blockchain Solve Here?
    • – Where Is Credit Intermediation?
  • Who Should Run a Securities Lending Blockchain
  • About the Author
  • About Finadium LLC
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