[Cryptonomics Research] The Coevolution of Banks and Corporate Securities Markets - Lessons for Crypto Evolution

The Coevolution of Banks and Corporate Securities Markets: The Financing of Belgium's Industrial Take-Off in the 1830s

Abstract excerpt:

Recent developments in the literature on financial architecture suggest that banks and markets not only coexist, but also coevolve in ways that are non-neutral from the viewpoint of optimality. This article aims to analyse the concrete mechanisms of this coevolution by focusing on a very relevant case study: Belgium (the first Continental country to industrialize) at the time of the very first emergence of a modern financial system (the 1830s). The article shows that intermediaries played a crucial role in developing secondary securities markets (as banks acted as securitizers), but market conditions also had a strong feedback on banks' balance sheets and activities (as banks also acted as market-makers for the securities they had issued).

This may seem like a history lesson, but I think it has some relevance to the evolving crypto landscape. As soon as one has tradeable contracts, be they shares, bonds, cryptocoins or tokens, then there will be intermediaries. Whether they be called banks or something else is not so important as their function.

Whether it be liquidity funding, such as done by Tether and other stablecoins, or direct lending, such as done by the delegation markets on Steem, including private lenders such as Hive account@neoxian, such functions co-evolve with the underlying markets.

This poses an issue with those who see cryptos as removing some power from the established banking structure as they see similar structures evolving within the cryptoeconomies. Whether this can be sustained by smart new entrants to the field or eventually taken over by the wealthier global financial powers remains to be seen. Even if such intermediary functions can be automated, there will still ultimately be some human beneficiary.

Or perhaps not!?