Do you really own those shares? The present capital markets system eliminates the need to deliver physical share certificates to stockholders, but that also means that shares held by brokerage intermediaries can be re-used as collateral over and over again, multiple times a day, to create credit – a practice known as "rehypothecation". This creates double-counting in records, preventing transparency from the standpoint of regulators, and increasing systemic risk. This is one of the reasons why capital markets are a perfect candidate for blockchain disruption. Securities issued on a blockchain will remain there for the duration of their existence, not only providing transparency into who the true owners are, but with the additional benefit of enabling faster trades.
You Don't Really Own Your Securities; Can Blockchains Fix That?
Nearly all publicly traded equities and a majority of bonds are owned not by the investors themselves but by a little-known entity called Cede & Co. This attenuation of property rights creates systemic risk, but an effort is underway to transform the system.
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