Financial service firms and technology providers around the world will spend more than US$1 billion this year on efforts to deploy blockchain technology in capital markets, according to a new report from Greenwich Associates.

Financial service firms believe that blockchain (also referred to as distributed ledger technology (DLT)) has the potential to transform global capital markets, Stamford, Conn.-based Greenwich says in a statement published Thursday.

“Blockchain technology is revolutionary because it allows, for the first time, a digital asset to be securely transferred from one party to another in near real time, without the need for a third-party intermediary,” the Greenwich statement says.

Research, based on the firm’s interviews with 134 market participants that are working on blockchain technology, found that banks, brokers, exchanges, and central counterparties (CCPs) are leading the charge, Greenwich says, while asset managers are being more cautious.

The research also found that 32% of firms with blockchain initiatives underway have an annual budget of at least US$5 million per year, and another 15% have budgets of more than US$2 million. “Projected across the entire financial services industry, that level of spending will likely top US$1 billion in 2016,” Greenwich says.

“A majority of the financial service firms and technology providers we interviewed are convinced blockchain will enable meaningful change across capital markets within five years,” says Richard Johnson, vice president in Greenwich Associates’ market structure and technology group, in a statement.

The benefits that firms expect include the potential to reduce operational costs and shorten settlement times. The payments sector is seen as the most promising potential application for blockchain.

“Additionally, study participants say a move to DLT in capital markets could add unquantifiable benefits, such as providing a catalyst for industry transformation, creating new value chains and new markets, and improving regulatory compliance, transparency, and information sharing,” adds Johnson.

The primary obstacle to this transformation, says Greenwich, is “vested interests in legacy technology systems.” Regulatory uncertainty is not seen to be holding back innovation, it adds.