© Solana Research Institute 2026 The Solana Research Institute is an independent, member-owned association. In addition, the opinions expressed in this publication are for informational purposes only and do not constitute financial, investment, strategic or legal advice. Discussion of asset performance is based on historical data which does not guarantee future results. Investing in any of the assets mentioned in this publication involves risk, including the potential loss of principal. You should conduct your own due diligence or consult a professional advisor before making any investment decision. While the ideas in this report were formulated in conversation with SRI members, they are the views of the SRI alone and do not necessarily reflect the opinion of any of the members

Introduction

On 8 March 2022, after Russia’s invasion of Ukraine pushed the price of nickel from around $30,000 a tonne to over $100,000, the London Metal Exchange suspended trading at 08:15 and cancelled every nickel trade made that day before the suspension. In doing so, it wiped out the trading profits of several participants but averted what it estimated would otherwise have been the default of 12 of its 45 clearing members.  

The London Metal Exchange is one of a select group of financial market infrastructure providers (“FMIs”), and decisions like this set the FMIs apart from ordinary market participants. FMIs are specialist institutions that support the efficiency, safety and fairness of financial transactions between other participants in the financial system. They include payment systems like T2 or Faster Payments, clearing houses like the Options Clearing Corporation, settlement systems like Euroclear and, by some definitions, trade reporting systems and providers of other services such as trade execution venues. They are invariably strictly supervised because of their systemic importance and typically embody a strong ethos of neutrality that matches the multilateral basis of their services. If forced to choose, an FMI will protect the integrity of the market it serves, even at the expense of imposing severe costs on some or all of its users.

This report analyses the impact of public blockchain on the evolution of this important, but often overlooked, sector. Public (or permissionless) blockchain protocols bring attributes to the financial system like open access, composability, radical transparency and open governance that have never before been available and which could unlock a transformative wave of innovation in financial services. They also support, as freely available, native capabilities many of the functions that sit at the core of FMIs’ customer propositions, including asset issuance, settlement and custody. It seems reasonable to expect that such a shift in the supply curve for these functions will have consequences for the business models of FMIs which have traditionally been the only organisations to offer them. However, FMIs offer more than just operational services: they also bring specialised legal and risk management frameworks that give them their unique status in the financial system. So, what happens if you break the link between the functional and the non-functional components of the FMI model?

It is still very early in the life of blockchain as a financial platform: so-called “real world” finance 3 on blockchain is currently a rounding error on the hundreds of trillions processed by traditional FMIs. However, the momentum for change is clearly building. Regulators are establishing new rules for digital business, and institutional players are moving from running proofs of concept on private networks to launching real products on public blockchain. Baillie Gifford, a long established fund manager in Scotland, has, for example, recently launched Bagey, a fully “digitally native” fund where public blockchain (in this case, Solana and Ethereum) is the official record of ownership of fund units and the fund can be traded in the secondary market.(1)

But if the view that blockchain will play an important role in the future of finance is increasingly mainstream, it is not yet possible to determine what a blockchain dominated financial system will look like. Few would disagree that the things traditionally provided by FMIs, like efficiency, safety and fairness, will still be required. But how should they be delivered? 

The answer to this question lies somewhere between two extremes. On the one hand are people who believe in the system as it currently exists. For them, blockchain is just a way for the same institutions to deliver the same kinds of services to the same groups of users in a better way. At the other extreme are those who believe that blockchain provides the tools to burn down the temple, full of usurious oligarchs who privatise profits and socialise losses, and build the shining city on the hill. For these people, “code is law”. Functionality deployed openly on-chain is all that is required to support financial transactions, because voluntary use of a service whose workings are fully open to inspection is de facto consent to any outcome that arises. No institutional overseers are required. 

We attempt to narrow the field between these two extremes. At the core of our analysis is a thought experiment that asks what FMI services would look like if a significant proportion of finance moved onto open, permissionless blockchain. We sketch out how FMIs’ underlying objectives could be supported, the competitive dynamics that may emerge, who is best placed to exploit them, and what role regulators could play in facilitating or blocking change. We are not making a forecast and certainly are not predicting a timeline. Our aim is to deconstruct today’s FMI propositions, identify the individual value components that they offer and consider how this value can be delivered in ways which support the creative potential of public blockchain.

Chapter 1 defines the role of an FMI, building on both formal definitions and observations about the business models of organisations providing FMI services. In Chapter 2, we examine the unique capabilities and features offered by blockchain protocols as systems for managing transactions. Chapter 3 synthesises these two strands and examines how FMI services might be delivered on-chain. Chapter 4 examines the legal and regulatory implications of the shift to onchain services. Finally, in Chapters 5 and 6, we delve into the competitive dynamics unleashed by the coming change, asking whether the advantage lies with incumbents or challengers, sizing the revenue opportunity for both groups and sketching out the strategic implications that follow.

The report is written for people who are interested in market infrastructure, whether as users, operators, regulators, technologists or observers, or who are developing infrastructure services on blockchain. We assume some level of knowledge about both financial infrastructure and blockchain operations, although we do not go deep into the technicalities of either. We argue a view rather than offering a neutral survey and as such we invite disagreement and discussion.

Executive Summary

FMIs provide certainty about the outcome of financial transactions. They do so by combining operational services (asset issuance, trade execution, clearing, settlement and custody) with a legal status that gives those operations force. That combination locks customers in through network effects and concentrates transaction flows.

Permissionless blockchain does not merely digitise these services; it commoditises the operational layer on which they are built. Assets can be issued as customised, self-governing tokens, directly on-chain. Settlement is the core capability of the protocol itself. Custody largely returns to the asset owner. Trade execution, already contested in traditional finance (TradFi), becomes more so on-chain, with no special role for incumbent exchanges. And open networks and cryptographic message authentication remove technical barriers to participation.

This does not mean that FMIs disappear.

First, network effects, where the utility of the service increases with the number of users, will persist for services that are positioned at the centre of a group of users who share a common interest. Examples might include a dominant settlement asset, a liquidity pool, an identity or permissioning standard, or a certification regime.

Second, the governance and legal frameworks that support FMIs cannot simply be wished away. The outcome of transactions must be guaranteed under law, and the policy objectives that gave rise to much financial regulation, like systemic risk reduction or consumer protection, will not change. However, these needs may be met in different ways. For example, technical listing authorities could certify an issuer's identity and ensure that issuer-deployed token mint contracts meet agreed standards; settlement notaries could confer legal finality on transactions settled on-chain.

Services such as these could sit around the minting, transactional management and custody capabilities provided by the blockchain protocol, interacting directly with end-users to offer deconstructed FMIs in place of today's integrated, monolithic providers. This does not necessarily mean services will be available to everyone: access controls can be built into the application and token layers, allowing an issuer or venue to restrict participation just as deliberately as any FMI does today. But the decision to do so becomes a management decision, not a logistical necessity.

Moving towards a more open, decentralised FMI landscape may challenge existing regulatory frameworks. However, it need not compromise the public policy objectives underpinning FMI regulation today. We tested our future state against all 24 of the Principles for Financial Market Infrastructures, the globally agreed operating standards for FMIs, and identified no fundamental barrier to an FMI that operated on public blockchain.

Nevertheless, the need to navigate the patchwork of domestic, corporate, market and property law in each jurisdiction may slow progress towards this new model and will twist the shape of whatever emerges. Regulators in major jurisdictions are actively working to facilitate on-chain adoption, through sandboxes, expedited licensing, and targeted no-action relief. However, laws and regulations themselves directly impact industry structure and create barriers to competition that may prevent new models emerging.

Regulation of Central Securities Depositories (CSDs), for example, bundles together four distinct functions: notarisation of securities issues, transfer of legal title, finality of settlement and provision of low-risk cash assets for the payments leg of the settlement. The effect is to force people to go through specialised, remote, protected entities to settle private property transactions, whether they want to or not. This feels wrong in principle. If the concept of private property means anything, it should be possible for any person, whether legal or natural, to purchase an asset through an electronic, peer-to-peer transaction with no intermediaries required, pay for it in whatever form of cash they agree with the counterparty, and be certain that, once settled, no-one can dispute their title. Blockchain supplies the technical means for this to happen, but it will remain impossible without a genuinely different, more modular blueprint for financial regulation.

The possibility that new service and business models arise also raises the possibility of a changing of the guard among the service providers, but this is by no means certain.

FMI incumbents look formidable on paper. They have massive scale and established brands as well as regulatory protection and, in some cases, a legal status that blocks any would-be challenger. But how far do these advantages translate to the new environment?

FMI attempts to build token-based infrastructure to date are not encouraging. ASX wrote off a quarter of a billion Aussie dollars on a failed "DLT" replacement for CHESS, its legacy settlement system; SIX Digital Exchange delivered genuine world-firsts and still failed to build a viable business. The position only looks promising where incumbents can leverage a privileged legal or market position into the new environment, as is the case with the DTCC.

Even if FMIs do make the move, the commoditisation of the services around which their traditional business models have been anchored leaves them vulnerable to competition and, in the last analysis, increasingly dependent on the goodwill of regulators to maintain their status. The FMI wallet today comes to roughly $31.5 billion. Our analysis suggests that, absent regulatory protection, just over a third of this would survive migration on-chain; the rest dissipates as consumer surplus or relocates to on-chain competitors.

Of course, the wider evolution of on-chain financial services means that this is not a simple story of the migration of existing businesses. Many new opportunities are likely to emerge, from direct access clearing models, to offering settlement assets robust enough to support wholesale cross-border payment flows through the correspondent banking network. Some of these opportunities may be substantial in scale and collectively they may replace the revenue lost from FMI's legacy business.

Yet, incumbent FMIs are not necessarily best placed to capture them. Many of these opportunities will emerge as disruptive innovations, initially built around customer groups ill-served by the existing system and operating on economic models the incumbents cannot live with, in much the same way as Netflix overtook Blockbuster, a business that spurned the chance to buy it in 2000 and fumbled the switch to streaming.

Faced with this challenge, we identify four strategies for incumbents:

1. Lobby to preserve regulatory protections.
2. Defend a genuine legal or market chokepoint.
3. Own the standards which will govern future business practices.
4. Wait and acquire the emerging winners.

By contrast, a disruptor embracing these new opportunities is already racing for a different prize. But, in building the infrastructure that can serve the new opportunities, it can also acquire the capability to support the legacy business, as a byproduct and on its own timetable rather than the incumbent's.

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