Cardano Foundation: Blockchain would have prevented GME controversy
Frederik Gregaard, the CEO of the Cardano Foundation, believes that a blockchain infrastructure for capital markets could have prevented a fiasco like the one surrounding GME.
The recent GameStop controversy has prompted several Blockchain.commentators to once again make it known that they believe in a future restructuring of the financial sector. The events Bitcoin Bank scam surrounding GameStop are much more than a pure „David versus Goliath“ story. Small investors from Reddit are going up against predatory hedge funds in this one
Frederik Gregaard, the CEO of the Cardano Foundation, tries to focus on other aspects in this discussion about the balance of power, rules of the game or legitimate methods in the recent clash between the little people, hedge funds, intermediaries, Robinhood and regulators.
Some participants in the meme-share craze saw themselves as something like insurgents fighting the system with its own weapons. Many people criticised their strategy and motives on political grounds. Gregaard, on the other hand, focuses on technology, transparency and rationalisation to fight the evils of the system. He talks about the cynicism and cunning of Reddit users as well as the self-interest of institutional and systemic actors themselves.
He analysed Robinhood’s controversial decision to restrict trading amid the GameStop controversy. Gregaard commented:
„We now know that the real issue was the intensity of trading activity. That forced Robinhood to set higher margin requirements for certain items. Dias exceeded the capacity of various players in the buying, selling and settlement process. This in turn led to a backlog of settlement requests and consequently liquidity issues for clearing houses.“
This decision, Gregaard continues, was felt first and most severely by the „cogs in the wheel“, i.e. the brokerage firms
He claims that if post-trade settlement had been carried out with a public blockchain ledger, the bottlenecks in the settlement process would have been visible to all market participants on the chain. This would have distributed information more evenly and provided insight into „market inefficiencies“. In his summary, Gregaard cited the recommendation of Big Four accountants PriceWaterHouseCoopers. That firm said technology could „reduce operational complexity and provide a single verified source of truth“.
In addition to transparency, Gregaard said it would also improve the speed and efficiency of the clearing and settlement process itself. This would be possible by choosing a system, such as blockchain, where there are no middlemen and it works in a distributed way. Much of the behind-the-scenes operations would thus be more visible to the average user and clearer for the back-end institutions. It would also remove barriers to the immediate settlement of assets and eliminate the need for cumbersome intermediate processes.
Gregaard told Cointelegraph that regardless of recent events, there are „opportunities for synergies and working partnerships between traditional financial institutions and leaders in the decentralised ledger technology industry“. He also noted that as the blockchain industry matures, regulation would also become stronger. „This could lead to friendlier legislation that enables Blockchain to provide an immutable audit trail of all transactions.“ The CEO further explained:
„With an open-source blockchain infrastructure, like Cardano, anyone can explore our code and develop solutions that can be deployed on our blockchain. This is just one potential use case scenario where we believe we can contribute to innovation. We also welcome people into our ecosystem who want to bring about change.“