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In a Streetwise Professor blog post, University of Houston Finance Professor Craig Pirrong expressed skepticism that blockchain technology will "disintermediate" central clearing parties.
Professor Pirrong explained that while blockchain does some of the same things that a CCP does, it does not do all of them, and "omits the most important bits that make central clearing central clearing." He stated: "there are certain core functions of CCP clearing that this blockchain proposal does not offer," including mutualizing default risk, hedging and managing defaulted positions and porting customer positions from a default intermediary to a solvent one, and managing liquidity risk. He stated:
[B]lockchain evangelists often claim to offer something new and revolutionary, but what they actually describe often involves re-inventing the wheel. Maybe this wheel has advantages over existing wheels, but it's still a wheel.
Professor Pirrong argued that to the extent blockchain does not offer and does not perform functions demanded by market participants, or by regulators, market participants will prefer using a CCP. He asserted that "this wheel may have some serious disadvantages as compared to existing wheels, namely, the bilateral OTC market as we know it." While there will be a role for blockchain in the financial markets, it will not be able to function as a substitute for central clearing, he said.
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