Policy Resource

GFMA Publishes Report on Impact of DLT in Global Capital Markets


The Global Financial Markets Association (GFMA) together with Boston Consulting Group (BCG), Clifford Chance and Cravath, Swaine & Moore LLP, have published a new report highlighting the potential transformative benefits of Distributed Ledger Technology (DLT) for capital markets and calling for market participants to proactively shape its future use, as well as for greater regulatory clarity from policy makers.

The report, “The Impact of Distributed Ledger Technology in Global Capital Markets” evaluates the opportunities and risks of DLT and DLT-based securities and assesses the applicability of existing legal, regulatory, and risk management frameworks. To illustrate the potential of DLT in capital markets, the report examines three emerging use cases: collateral management; tokenization of assets; and sovereign and quasi-sovereign bonds.

The report finds that DLT could unlock transformative cost-saving and operational efficiency benefits (for example, approximately $20 billion annually in global clearing and settlement costs) and innovation-led growth, broader market access, and new liquidity pools when operating at scale (e.g., approximately $16 trillion global market for tokenized illiquid assets by 2030).

Despite the growing momentum in developing DLT use cases, the report also acknowledges that, there is still no widespread adoption in securities markets, with most DLT-based issuances to date largely experimental exercises due to the challenges identified.

GFMA therefore sets out five calls to action, for industry participants and regulators, to overcome existing barriers to adoption and advance the development of DLT-based capital markets:

  • Harmonize global regulatory and legal frameworks for clear and unambiguous definition of the key terms and risk mitigants required to support the development of a transparent, disciplined, risk-focused, and effective digital market infrastructure.
  • Enable interoperability by building consensus on common standards and vision for DLT-based markets to guide market linkages with traditional market infrastructure.
  • Drive faster adoption by prioritising resources in asset classes where DLT has the most upside potential to help pool and deepen liquidity, particularly for illiquid assets.
  • Collaborate on the advancement of DLT to promote technical solutions, including around scalability, cybersecurity and regulatory compliance.
  • Continue the development of DLT-based payment solutions, such as tokenized commercial bank money and deposits, to facilitate safe and efficient settlement processes.

The GFMA has developed an approach to the classification of digital assets that reflects the principle that the treatment of digital assets should be underpinned by a clear methodology for identifying different types of digital assets’ risk. This will allow for tailored regulatory treatment, to mitigate reputational risks caused by conflating different use cases of DLT, as well as promoting legal clarity and confidence for asset managers, investors, and issuers.

– 17 May 2023 –

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GFMA with BCG, Clifford Chance, and Cravath, Swaine & Moore LLP published a report on the impact of distributed ledger technology (DLT) in global capital markets.