A latest research paper from the head of interest rate and credit models at Banca IMI, an investment banking and capital markets subsidiary of Intesa Sanpaolo, discusses the ‘real business cases’ of blockchain technology for financial markets, CoinDesk reported.

“This paper shows that there are real business cases for improving financial markets based on the lesson learnt from cryptocurrencies, but, differently from what the hype-enthusiasts say, they are not application of a technology to the existing business model of financial markets. They are reforms of the business model itself”, writes Massimo Morini.

Morini noted that aspects of market organization, inspiration for a different accounting and legal system, and some aspects of the technology are some of the things that need to be exported from the world of cryptocurrencies, adding that these can be a huge contribution towards more robust, efficient and stable markets.

“One crucial misunderstanding here is the idea that Blockchain Technology can be exported to financial markets as they are to make them more efficient. This is meaningless; Blockchain technology was created to change some trust-based business processes to make them less reliant on trust; without structural changes in this direction the best of Blockchain technology is lost and just the inefficiencies are left”, Morini added.

He said that what’s equally meaningless is the idea that Blockchain technology cannot be used outside the Bitcoin world, and added that financial industry must get ready to use the concept of trust in a totally different way and to analyze current inefficiencies and risks in the current business processes.

He also discussed the concept of smart contract - a piece of program code, in a given computer language, executing the transaction agreed at inception between the parties. “Large-scale application of smart contracts is exactly the test that distributed ledgers for financial markets need to perform”, he wrote.

While concluding, Morini highlights the importance of properly timed regulations in this space for realizing the true benefits of the technology.

"Legal and regulatory status could come earlier than expected if regulators see advantages in an architecture which is more transparent and creates less risk than most of the current solutions."