Matt Hougan: "Stock Trading Slower Than Email, The Solution is 'Blockchain'"

▲ Stock trading, email/AI generated image

A prediction has been made that the financial settlement system, which currently takes several days, could transition to real-time settlement through blockchain-based asset tokenization.

Matt Hougan, Chief Investment Officer at Bitwise, strongly criticized the current settlement structure of the stock market in an interview with Sujal Jethwani. He pointed out the reality that it takes several days for assets to be reflected in an account after a U.S. stock trade is completed, emphasizing that a financial system slower than email is being maintained. He explained that the global financial sector is moving towards asset tokenization as an alternative to solve these inefficiencies.

Larry Fink, CEO of BlackRock, evaluated asset tokenization as the starting point for a transition where all assets become digital. He defined tokens as digital certificates of ownership operating on a blockchain, stating that it enables the creation of a market capable of 24-hour trading and settlements in seconds. Hougan also presented that the introduction of tokenization would enable immediate settlement and eliminate intermediary steps in the existing financial system as key changes.

Current stock trading has a complex structure involving multiple entities such as custodians and banks, going through up to 7 steps for a single transaction to be completed. The costs incurred in this process are passed on to investors. Analysis suggests that using blockchain could simplify this structure, enabling an environment where funds move directly.

The current size of the tokenized stock market is approximately $680 million, while the entire U.S. stock market is about $68 trillion, showing a significant disparity. Paul S. Atkins, former Chairman of the Securities and Exchange Commission (SEC), predicted that the entire U.S. market could move on-chain within a few years. This represents a growth of approximately 100,000 times compared to the current state. Hougan emphasized that the market's potential is underestimated in light of this forecast.

The expansion of the stablecoin market and the growth of the blockchain ecosystem are also essential conditions for market transition. If global financial assets embrace blockchain technology, investors are expected to experience a financial service environment with email-level speed and significantly lower costs.

*Disclaimer: This article is for investment reference only and is not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*