In a collaborative effort, Cashlink, FinPlanet, and Porsche Consulting have conducted a comprehensive study to analyze the potential cost savings achievable through the implementation of Distributed Ledger Technology (DLT) in the capital market. The study, which presents a unified perspective, compares the costs associated with a conventionally issued bearer bond to a crypto security as defined by the eWpG along the entire value chain of a capital market transaction.
Key Findings of the Joint Study:
The independent “bottom-up” approach adopted by the researchers involved interviews with capital market experts and market participants, providing insights into the cost items associated with various processes in a capital market transaction.
- DLT Cost Savings Potential: The study concludes that a DLT-based capital market infrastructure could realize cost savings of up to 85% in the middle and back office processes by 2028, compared to the existing infrastructure. Even today, immediate cost savings of up to 22% are identified, contingent on underlying assumptions.
- Focus on Middle and Back Office Processes: The primary areas of significant cost reductions are identified in Corporate Actions & Asset Servicing and Clearing & Settlement processes. The adoption of DLT is expected to bring transformative efficiency and cost benefits to these operational facets.
- Tokenized Bonds: The study specifically addresses the cost savings associated with tokenized bonds, projecting an 85% reduction in middle and back office costs by 2028. Immediate potential savings are recognized across an eight-year bond duration, representing 120 basis points or 1.2% of the bond’s value.
- Immediate vs. Future Savings: Immediate cost savings of up to 22% are highlighted, with the expectation that the DLT-based capital market infrastructure will offer more substantial savings in the future.
The collaborative research underscores the significant role of DLT in reshaping the capital market landscape, bringing forth transformative efficiency, and reducing operational costs. The findings emphasize the immediate and long-term benefits that financial institutions and market participants can reap by embracing DLT in their operations.
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