Chapter 22: Trade Settlements (with Ehsan Nikbakht and Giga Zukhubaia) in The Emerald Handbook of Crypoassets: Investment Opportunities and Challenges
Currently, there are many inefficiencies involved in the security trade settlement life cycle. These inefficiencies mainly come from intermediaries involved in the transaction between buyers and sellers. The objective of this chapter is twofold. First, it examines distributed ledger technology (DLT) which is the underlying technology of all blockchain applications including trade settlements. Second, it reviews the major implications of the use of blockchain in trade settlements for cryptoassets.
Emerging blockchain technology provides investors, exchanges, regulators, and countless potential intermediaries with the most up-to-date technology with the highest efficiency, transparency, credibility, and automation enabled by the use of smart contracts. Smart contracts can enable an ecosystem to handle the process of trade settlements starting from execution to clearing and then settlement, reducing the reconciliation and recordkeeping costs and streamlining repetitive process present in today’s trade settlement system. The chapter highlight the benefits of implementing distributed ledger technology in today’s financial markets globally in all aspects of trading, including cryptoassets.