Imagine a world where you could buy stocks, bonds, derivatives, cryptocurrencies, or even works of art, all on one exchange, 24 hours a day, seven days a week, from anywhere. Where in the world.
On this exchange, transactions occur directly between two investors instead of going through a complex network of brokers, clearing houses and other intermediaries and custodians. They settle or close almost instantly instead of taking up to two days. The system is cheaper, more transparent and apparently more open. It is also potentially more volatile and risky for investors; profits can turn into losses in the blink of an eye at any time of the day or night.
Entrepreneurs have dreamed for years of using the blockchain technology, concepts and software that underpin bitcoin, to enable digital trading of virtually any asset. Today, the idea seems less far-fetched than ever.
When the business of video game retailer GameStop Corp. exploded earlier this year, it showed just how fragile today’s markets can be. He also showed that a new generation of equity traders operate a lot like crypto traders: flashmobs of retail traders gathering on social media and targeting an asset for a bulk buy are a hallmark of crypto trading. -currency for years.
Today’s financial markets are not designed for this type of trading, but a number of pilot programs and other experiments are investigating how to create digital markets that can keep up with changing times. “We’re seeing a tectonic shift starting to happen,” says Jeffrey Schumacher, founder of New Asset Exchange, a Manhattan Beach, Calif., Startup that aims to help companies create and sell digital securities.