This threatens to take business away from banks which traditionally offered a package of services, potentially weakening their business models. What is more, over the longer-term technological innovations, such as distributed ledger technologies (DLTs), could have profound impacts on financial intermediation.
DLTs have the potential to substantially reduce reconciliation costs for market participants, to disintermediate incumbents in the financial value chain, and to allow for a more efficient use of collateral. Through decentralised update and validation of records, they may even challenge the basic business models of intermediaries or central market infrastructures. So should policymakers be concerned about this?