Blackrock and Citadel Securities are reportedly backing a new stock exchange in Texas (TXSE) that is slated to compete with the likes of the New York Stock Exchange and the Nasdaq.
In this post, we'll discuss the possibility that this new stock exchange will be blockchain-based, and if it would be able to compete with the existing decentralized exchanges (DEXs) that already exist in the crypto world.
Tokenizing Stocks and Bonds
Larry Fink, the CEO of Blackrock, has been talking about the tokenization of stocks and bonds as of late. It would seem that he has pulled a 180 on crypto since calling it an "index for money laundering" back in 2017.
"We believe the next step going forward will be the tokenization of financial assets" he stated in a recent Bloomberg interview (posted below).
He outlined three main points as to why the tokenization of securities would be an overall positive move:
- Eliminate illicit activity
- Instantaneous settlement
- More efficient investor voting
https://x.com/AbsGMCrypto/status/1798168177538417035
It would be an understatement to say that Blackrock is late to the game here.
People in the crypto industry have been calling for the tokenization of financial assets since the launch of Ethereum back in 2015, and we already have numerous projects working on bringing Real World Assets (RWA) to decentralized blockchains.
Legacy Exchange Problems
The problem with traditional stock markets is the friction involved with trading, and their lack of transparency.
For example, transferring a stock from one person's account to another requires the service of many intermediaries (brokers). This takes time and also opens more room for error.
The ownership of stocks isn't transparent at all either. Investors simply have to trust that financial institutions have their databases in order to keep track of who owns what.
It would seem Blackrock has recognized the benefits of blockchain technology, namely instant settlement, and want to apply it to traditional stock markets.
Which Blockchain?
If the TXSE ends up being a blockchain-based exchange, the question then becomes which public blockchain will they use? Of course, crypto Twitter is full of speculation, and people pumping their own bags.
Could the TXSE be a Cosmos zone, a Polkadot parachain, its own shard in MultiversX? Could it be hosted on Polymesh, the Hedera Hashgraph, Ethereum, or one of its side chains?
Probably the more likely scenario is that the TXSE would launch their own private blockchain and select the validators themselves, which would make it a fairly centralized project.
Sufficiently Decentralized?
If that's the case, would the TXSE be sufficiently decentralized to make it any different from traditional stock markets? Some questions need to be answered.
Would Blackrock be able to take a token (stock) out of your account if you were accused of being unvaccinated or a non-woke bigot, for example?
Moreover, would the operators of the TXSE be able to halt trading, like what happened when retail Gamestop trading went wild?
The entire point of blockchain is censorship-resistance and the true ownership of assets. If Blackrock cannot guarantee these qualities, eventually the people will trust their assets more on blockchains that are truly decentralized.
Decentralized Exchanges (DEXs) Win
I believe the more likely scenario is that traditional financial institutions will be replaced by decentralized blockchain projects that have grown organically over years and decades. New companies will launch their own tokens on these decentralized networks, and people will increasingly put their trust in them.
We already have DEXs like Uniswap, Osmosis, HydraDX, xExchange, Thorchain, and more where tokens of existing projects can be traded in a decentralized manner.
When all is said and done, the people will choose censorship-resistant ownership and trading over policies that favor a certain class of people over another.
If you learned something new from this article, be sure to check out my other posts on crypto and finance here on the HIVE blockchain. You can also follow me on InLeo for more frequent updates.
Until next time...
Resources
Yahoo Finance Article [1]
Blackrock Stock Exchange Image [2]