Spectrum of Adoption of Blockchain Technology: Implications for Emerging Capital Markets in Africa

The capital market is instrumental to the economic development process of African states. A key enabler of such development is the use of emerging technologies such as blockchain technology and its transformative role in driving an efficient market. As the conversation on the prospect of adoption begins to gain traction in this region, an important point of discussion is the extent to which the technology would disintermediate the market. This is a focal point of discussion given the unique configuration of traditional capital markets and the properties of the technology. Evidence from various simulations and regulatory sandboxes on the application of blockchain technology across the globe shows that existing market institutions will remain key players in a blockchain-operated capital market. This model creates tension for African capital markets given the institutional frailties in the region. Using Nigeria as a principal case study, this article discusses the implications of the technology with a key focus on governance, custody of assets and enforcement mechanisms. Grounded on Douglass North institutional theory, this article argues that trust and accountability by market institutions, underscored by a strong enforcement mechanism, are required to effectively realise the impact of the technology. This article makes key recommendations to address the tension surrounding the implications discussed by creating a balance between innovation and systemic stability in the region’s capital market.