BlackRock, Citadel Securities backing new TXSE: will blockchain play a role?

BlackRock and Citadel Securities have invested in a group aiming to disrupt the U.S. stock exchange market. 

Texas Stock Exchange chairman and CEO James H. Lee boasts a warchest of $120 million from over 24 investors to potentially launch an exchange to rival NYSE and Nasdaq. Among the consortium of investors includes the world’s largest asset manager, BlackRock, and giant market maker Citadel Securities. 

Are BlackRock and Citadel planning a blockchain move in stock markets?

According to The Wall Street Journal, the TXSE envisions itself as a challenge to the hegemony maintained by traditional and perhaps outdated exchanges. The group also wants to address rising compliance fees and listing costs.

While neither BlackRock nor Citadel has indicated a crypto-related strategy with the TXSE investment, blockchain technology may be a working solution to the agenda set forth by Lee’s group. 

Blockchain networks have been known to run energy-efficient models compared to the traditional financial sector. Naysayers and non-believers have scrutinized Bitcoin’s (BTC) proof-of-work (PoW) structure over the years as being energy-intensive, but the data disagrees.

A 2021 Galaxy Digital report cited by the Nasdaq said Bitcoin consumes less than 50% of the energy used by the banking systems. Considering that top altcoin blockchains like Ethereum (ETH) and Solana (SOL) employ a more energy-optimized structure with proof-of-stake (PoS), decentralized chains could operating costs for the TXSE. 

Introducing on-chain mechanics to the world’s largest capital market could also unlock 24/7 trading access and instant settlement. The stock market only runs for five days a week. Anyone around the world can buy BTC, ETH, or SOL whenever they want, provided the chain’s uptime remains uninterrupted. 

Bitcoin, in particular, has not experienced downtime in over a decade, and Ethereum is arguably the most trusted blockchain for defi, with over $66 billion in total value locked per DefiLlama. Tokenization of real-world assets like bonds and equities has also skyrocketed in recent years to a $9.4 billion market and growing, indicating that bringing stocks and other securities is possible.