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Paxos using blockchain to fix problems in capital intensive businesses

Charles Cascarilla, CEO of the fintech company Paxos, says the current way of dealing with back and middle office post-trade processes is too manpower-intensive and is hindering businesses. He believes blockchain is the solution to some of the problems affecting capital-intensive businesses.

Since the financial crisis, exchanges have eliminated 10 percent of costs out of the front office but only five percent out of the back and middle office, because firms are using old technology, Cascarilla said. Enter blockchain, a distributed ledger that lets everyone use a shared books and records system, getting rid of the need for different firms to do duplicative processes.

“Blockchain is still in the early, implementation stage,” he said. “Once you get through that stage, you hit adoption, and that’s where you will see it transform markets in more fundamental ways.”

Paxos’ first step is in the London gold market with Euroclear Bankchain, a joint venture with Euroclear to bring instant settlement and “true delivery versus payment” to the London bullion market, Cascarilla said. The settlement of unallocated gold is a very capital-intensive process, and Paxos expects Euroclear Bankchain to greatly minimize risk and reduce capital charges. Due to launch in late 3Q 2017, Bankchain will be the first delivery versus payment settlement platform for precious metals.

Blockchain is still in its nascent stages, but he said in 2018 or 2019 we will “really start to use it.”  

 

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Rudolph is managing editor of John Lothian News (JLN).