Digitalisation will have an impact across the wider value chain of the securities services industry as well. That value chain has never been static. If you had bought a stock prior to 1975, you would have held a physical share certificate for that stock, for example. However, after 1975, that actual certificate would have been immobilised in a Central Securities Depository (CSD). From 1985, securities were issued and settled in book entry form, and certificates were phased out entirely. Over the last decade, digital issuance has begun, and blockchain technology has come to the foreground.
The next evolution will see a rise of new settlement platforms, and the issuance of digital securities. Participants in the chain will evolve further. By 2030, because of technological advancements, it will be the job of global custodians to act like digital conduits for clients who require local access to markets. One thing we are clear about is that nobody is going to wake up on a Monday morning with a new-found ‘digital religion’. The move from traditional electronic to digital will take time, just as it took many years, and a process, for physical share certificates to be phased out in the 1970s and 1980s.
For a certain period of time after 2030, custodians will be responsible for managing the co-existence of heritage and digital ecosystems simultaneously. Blockchain will co-exist alongside traditional CSD custody. It means custodians will have to be more adaptive, and flexible, than ever before.