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Gu Yanxi: Blockchain’s changes to the securities industry began outside the industry



The situation at the beginning of the Internet is very similar to the current blockchain situation. In the early days of the Internet, this new technology was used by people to send emails and build personal websites. Later, portals like Yahoo began to appear. Initially, the information disseminated on the Internet was directly produced by individuals and companies, and there was no professional content-ethexc produced by professional publishing organizations such as news media and publishing houses. The publishing industry did not pay enough attention to the development of the Internet. From the perspective of the publishing industry, the Internet is nothing more than a tool for everyone to express their opinions and communicate with each other in a low-cost way. Really professional and valuable viewpoints and content-ethexc still need to be provided by professional organizations such as newspapers, magazines and publishing houses. This state has been going on for a long time.

The Internet's impact on the news and book publishing industries has been a gradual process of erosion. In such a long-term and slow development process, the market share of newspapers, magazines and books has become smaller and smaller, and people have gradually developed the habit of obtaining various information through the Internet. When the mainstream institutions in the publishing industry really realized the threat of Internet technology to their business, they were unable to make corresponding countermeasures. Today, self-media based on text and video and more dedicated institutions in the subdivided fields have become the main channels for people to obtain information. Traditional mainstream publishing organizations have far less influence in this industry than before. Generally speaking, the Internet's changes to the news publishing and media industries started from outside the industry.

Gu Yanxi: The launch of Diem will greatly increase the liquidity of the stablecoin market and promote the development of financial services based on stablecoins: On December 8, Gu Yanxi, a researcher of blockchain and encrypted digital assets, published a column saying that Internet technology and blockchain The application development of chain technology is enabling future banking services to be provided by different types of providers in a broader manner. He said that the current digital stablecoins in the market such as PAX, USDC and the upcoming Diem USD stablecoin are all operated and circulated on the basis of different blockchain support. These digital dollar stablecoins are generated in a 1:1 manner with the US dollar. The U.S. dollar reserves on which it is based are hosted in institutions with custody mechanisms. The entities on the chain that provide various financial services based on these digital stable coins are no longer limited to banks. Non-bank institutions, individual users, and even hardware on the Internet can provide some kind of banking service. Gu Yanxi also pointed out in the article that the expected launch of the Diem digital dollar stablecoin in mid-2021 will greatly increase the circulation of digital stablecoins in the market. Financial businesses based on these digital stablecoins will therefore be more developed. More importantly, these newly generated digital stablecoins operate under the premise of compliance, so various applications based on these stablecoins can have no compliance concerns. [2020/12/8 14:32:29]

Different from the early days of the Internet, the securities market has already experienced the changes brought about by the development of technology, especially the changes that Internet technology has brought to many industries, including the press and publishing industry. In the early days of the development of the blockchain, the securities industry has already begun to actively explore how to use blockchain technology to change existing businesses, so as to avoid being impacted by technological development, or even eliminated by the development of technological trends. Now, some institutions in the securities industry are already advancing this process, such as the Swiss digital asset exchange and Nasdaq (see my related articles and video directions). These institutions are also the leading companies in the current securities industry. In this respect, this is completely different from the original publishing industry's response to Internet technology. Nasdaq itself, with the help of the application of new technologies, has adopted an electronic trading mode that is completely different from the traditional trading mode, and thus defeated the traditional mainstream stock exchanges. The emergence of blockchain technology now also makes Nasdaq very sensitive. It has now begun to establish the underlying technical foundation of a new type of digital asset exchange based on blockchain technology. In the course of the changes brought about by blockchain technology to the securities industry, Nasdaq will continue to occupy a very competitive market position in the new digital financial ecology.

Gu Yanxi: The US SEC may sue Uniswap due to regulatory and market influences: Gu Yanxi, a blockchain and encrypted digital asset researcher, published a column saying that the Uniswap project recently issued the token UNI. In view of the nature of the token, the method of issuance, the object of issuance, and the fact that UNI has no less than 2,000 users in the United States, he believes that it is likely to become the object of SEC prosecution. Gu Yanxi stated in the article that according to several dimensions of the definition of securities products in the United States, if the holder expects future profits and achieves the appreciation of this product through the efforts of an ordinary enterprise, then this product should be recognized as a security product. It is defined as securities, and its mode of operation should also operate in accordance with securities regulations. If UNI is considered a security, then its subsequent series of related operations will not meet the requirements of the securities law. In addition to the above analysis of UNI attributes according to the definition of securities, other characteristics of UNI also make it more like a security. In addition, UNI is already trading on multiple centralized matching trading platforms, and its trading method is the same as that of stocks. He mentioned in the article that an important consideration for whether the SEC prosecutes a project is the impact of the project on the US securities market. UNI has now been issued and circulated in the US market, and has been traded on a centralized trading platform. If the SEC does not take measures to prohibit the circulation of UNI, then there will be more digital tokens similar to UNI circulating in the US market. In addition, because such digital tokens are generated and flow into the market very quickly, if the SEC does not take action soon, then its supervision in this area will be difficult to be effective in the future. [2020/9/25]

Also in the securities industry, for some other exchanges, especially those currently dominant in the exchange business, since the application of blockchain technology will directly affect their existing interests, they do not Very strong motivation to change the status quo, but adopted a wait-and-see attitude. However, since the change of blockchain technology to the industry is a continuous and slow process, these exchanges will not obviously feel the impact of this change on their business. But when more and more digital product trading businesses start to develop on the new financial market infrastructure, it will be difficult for such exchanges to seize such opportunities. The development of the US options exchange market is one of the most obvious examples of this. When the U.S. options trading market first started in the 1970s, there were four options exchanges. They are the Chicago Board Options Exchange (CBOE), the American Stock Exchange (AMEX), and the Philadelphia Stock Exchange (PHLX) and Pacific Stock Exchange (PSE). These four options exchanges have been providing all options trading services in the United States. But in 2000, the International Securities Exchange (ISE) began offering a fully electronic matchmaking service. The ISE has continued to steadily gain market share in options trading as this method is superior to the traditional face-to-face call trading in a trading pool. Not all of the original four options exchanges made the transition. Today, only CBOE remains independent of the original four.

Gu Yanxi: Digital asset transactions on the future blockchain should be free: On July 24, Gu Yanxi, a researcher of blockchain and encrypted digital assets, published an article "Digital asset transactions on the future blockchain should be free The" stated that based on the development of the Internet era, the current development of the securities industry, and the benefits that can be generated from the application of blockchain technology, future digital asset transactions should be free. He said that first of all, future digital asset exchanges must be based on distributed ledger technology. Distributed ledger technology will fundamentally change the securities industry. When blockchain technology and digital currency are used in securities transactions, transactions will be settled. Therefore, there is no need for clearing and settlement companies and registration companies in the current securities market, and the overall cost of securities transactions will therefore be greatly reduced. Trading commissions are therefore bound to drop significantly. Secondly, in the future securities market, DeFi applications will further reduce the cost of the securities market. Finally, since blockchain technology directly supports peer-to-peer transactions, many digital asset transactions in the future can actually be completed directly between the generator of the asset and the buyer of the asset. There is no need for a brokerage as a financial intermediary, and the cost of asset transactions will be further reduced. [2020/7/24]

In such a process of change, brand-new companies have a better chance of grasping the opportunities brought about by this change. For example, ISE is a brand new exchange. Because they don't have any historical baggage. However, the existing dominant financial institutions, the advantages they have established in the existing market system, instead become a burden for them to migrate to the new market structure. For example, in the traditional face-to-face trading exchanges, their exchange membership system is a factor that helps them succeed, but at the same time hinders their migration to electronic trading methods. Some of these exchanges, although they recognized the development trend, were unable to change the status quo, so they were eventually eliminated by the competition.

Voice | Gu Yanxi: After undergoing major changes, Libra may be the first to launch a stable currency based on the US dollar: Gu Yanxi, the founder and dean of the CBX Research Institute, said in the community today that the analysis of Libra should pay special attention to the following three points. First, Libra is essentially blockchain technology and encrypted digital assets on it. It's just that Libra has raised the application of these technologies to an unprecedented level. Second, Libra is actually in the process of changing. This project has undergone great changes from its initial appearance to its official announcement. There will still be great changes in the future. Third, American society is a commercial-driven society. It will not completely prohibit the launch of such a project, and Libra will still be launched after making great changes. The high-probability event Libra will focus on the underlying blockchain, and will definitely provide technical standards for the implementation of stable coins. It will first launch the corresponding stable coins based on the US dollar, and then more types of stable coins will be gradually launched. [2019/11/29]

In the current era of blockchain, the impact of blockchain on the securities industry is also starting from outside the securities industry. This process has actually started with the transaction of encrypted digital currency. The global trading of encrypted digital currency allows the market to see what the future stock exchange market will be like. With the development of encrypted digital currency transactions, compliant security tokens began to appear in 2018. Such a trading process has developed to today's 2020, and security tokens have begun to try to circulate in different regulatory jurisdictions.

Even today, I think that the change of blockchain technology to the securities industry is still very likely to come from outside the securities industry. The securities industry is a highly regulated industry. It's hard to make very big changes directly in this industry. Therefore, even if there are efforts in the industry to apply blockchain technology to this industry, the resistance it will face will be very large. The Australian Securities Exchange is advancing the application of blockchain technology to the settlement of securities transactions after the case is a very good illustration in this regard. Similarly, the process of applying for the establishment of the Boston Security Pass Exchange in the United States is also a case in this regard.

The change of blockchain technology to the securities industry is likely to come from outside the industry. It is likely to trade digital products in a peer-to-peer manner on top of a financial market infrastructure based on distributed ledger technology. These digital products may be original digital products, or digital products corresponding to actual commodities. Therefore, such an application is more like an e-commerce company for digital products. When such a market infrastructure is established, it is very natural for digital securities to migrate to this ecosystem for trading. The current trading method supported by centralized computing and centralized matching is likely to become one of the digital securities trading methods. And more types of digital commodities and digital financial products will be directly traded in a peer-to-peer manner.


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