Transforming clearing and settlement via blockchain technology will be a mammoth task for the financial industry, Larry Tabb has warned.

The founder of capital markets consultancy Tabb Group outlined the challenges of blockchain adoption for institutional investors, custodians and investment banks in a new whitepaper.

In short, he estimates that it will take not only years but hundreds of millions, if not billions, of investment dollars for effective integration.

His report, entitled 'Blockchain Clearing and Settlement: Crossing the Chasm', comes as most of the major banks and exchanges begin to investigate how they can leverage blockchain.

In basic terms, the technology allows for a decentralised network where every transfer is verified, processed and written down.

This, potentially, makes economic interactions cheaper, faster and more secure.

But when it comes to using the technology in the post-trade space for securities, Tabb says there are multiple issues.

These include overcoming the practical aspects of ownership, securities lending, FX, block allocations, the processing of physical securities, fractional ownership, and current clearing, netting and settlement practices.

That's without mentioning the modification and rebuilding of firms' internal technology.

“While some issues are significant to particular market slices, they may be non-issues for others, and things that may appear easy from the outside, may actually be very challenging,” says Tabb.

“For example, streamlining the allocations process may appear simple from a brokerage or custodian perspective, but problematic for investors; conversely, clearing and netting is a non-issue for investors while challenging for banks and brokers.

"While the block chain has very significant opportunities, for it to scale and become a major force in the processing of liquid securities, we as the financial community needs to understand how we can get blockchain across this chasm."