The blockchain technology that underpins virtual currencies such as Bitcoin represents a big opportunity for financial services firms, says a new report from Stamford, Conn.-based Greenwich Associates.

Based on a survey of over 100 industry professionals, the report says that the industry sees numerous potential applications for blockchain, also know as distributed ledger technology, in the capital markets, particularly as a way of reducing risk.

Blockchain networks “record transaction information and ensure that a digital asset cannot be spent twice or used by someone who doesn’t own that asset — all without any central oversight of either the currency or the ledger,” the report says.

Although actual adoption of the technology in the capital markets is still limited at this point, 94% of the financial professionals interviewed in the study believe distributed ledger technology could be applied in institutional markets, and nearly half of respondents are actively reviewing the technology within their firms.

The potential to reduce settlement, counterparty and custodial risk were all key drivers of this interest in the technology, the report notes. As well, over-the-counter (OTC) derivatives, private equity, repo, and loan markets are all asset categories that are likely to benefit from distributed ledger technology, the report finds. More established asset classes, such as equities, could also benefit from the technology, the report notes, but it sees the greatest potential for quick adoption among financial products where automation is still limited.

“Given the growth in trading volume but still limited infrastructure, the markets for leveraged/syndicated loans and private stock are strong candidates for early adoption of distributed ledger technology,” says Kevin McPartland head of Greenwich Associates market structure and technology research and co-author of the report.

“In both par loans and CLOs, a month-long settlement cycle is common and often includes the use of a fax machine,” says Dan Connell, head of the firm’s market structure and technology practice and co-author of the report. “For a market so obviously in need of technology, it makes sense to implement improvements with the latest tools and approaches available, like blockchain,” he adds.