BLOCKCHAIN TECHNOLOGY AND FINANCIAL MARKET EFFICIENCY: TRANSPARENCY, SPEED, AND TRANSACTION COST EFFECTS
Keywords:
Blockchain technology; financial market efficiency; transparency; transaction costs; settlement; financial innovationAbstract
Blockchain technology is among the most talked-about innovations in modern finance because it has the potential to transform how transactions are recorded, verified and settled across financial markets. Much of the early discussion has been about cryptocurrencies. But a more important question for finance is whether blockchain infrastructure can improve the efficiency of the broader financial markets. This article explores the relationship between blockchain technology and financial market efficiency in three dimensions: transparency, transaction speed, and transaction cost. The paper relies on the Efficient Market Hypothesis, transaction cost economics and recent scholarship on financial market infrastructure to suggest that blockchain can promote operational efficiency and post-trade transparency, especially in the clearing, settlement, and recording functions. But these benefits are not assured. They rely on governance design, legal enforceability, institutional adoption, and regulatory coordination to do so. The article argues overall that blockchain is not a cure-all for inefficiency but an infrastructural innovation that has different effects in different market environments.
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