Why do large banks refuse to use public ledgers and instead build their own blockchains?

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The complete transparency of blockchain ledgers conflicts with institutional risk management approaches. Traditional Wall Street institutions accept blockchain technology but may not embrace its current form. Don Wilson, founder of DRW, points out that public blockchains violate traditional financial regulations, leading Wall Street to favor developing private blockchains.

How does public ledger transparency affect an institution’s trust responsibilities?

Traditional financial institutions are cautious about adopting fully transparent public blockchains like Ethereum (ETH) because the nature of open ledgers conflicts with existing asset management regulations. At the Digital Asset Summit, Don Wilson, founder and CEO of DRW, stated that if fund managers publicly disclose every transaction detail on the chain in real-time, it essentially breaches their fiduciary duty to clients. Under current market structures, if the intentions of large investors are exposed prematurely, it can easily trigger market follow-on or reverse trading, causing sharp price volatility and harming the interests of original traders.

Will transparency mechanisms exacerbate market slippage and price impact?

When executing large trades, financial institutions must avoid revealing their strategies to the market. Wilson analyzed that if an institution handles significant holdings on a public chain, its trading activities will be fully exposed to the public eye, allowing other market participants to quickly detect and adjust their strategies. This high level of transparency can lead to serious price impact, increasing trading costs. In other words, the real-time disclosure feature of public blockchains becomes a trading weakness rather than an advantage for institutions that need to execute trades in batches or hide their intentions.

Private permissioned networks are more favored by large banks

Compared to public chains that pursue decentralization and full openness, major financial institutions like JPMorgan Chase prefer building private or permissioned blockchain networks. These systems allow strict control over data access and transaction validators, aligning with regulatory requirements for compliance and asset control. Additionally, issues like transaction order manipulation or front-running common on public chains do not meet the stability needs of traditional financial markets. Wilson emphasizes that “privacy” is the primary prerequisite for institutions to adopt blockchain technology; market structure protections outweigh technological openness.

What will be the future architecture of tokenized real-world assets?

Although large banks remain cautious about public chains, Real World Assets (RWA) are still seen as a significant transformation opportunity. Currently, banks and asset managers are actively testing transferring traditional assets like stocks and bonds onto blockchain to improve settlement efficiency. However, future industry standards are expected to diverge from existing public chain frameworks. While digital assets like Bitcoin (BTC) have developed mature market values, the tokenization of financial infrastructure will prioritize closed blockchain systems with privacy protections and permission controls.

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