Those markets work because trading activity rests on a vast network of credit relationships, clearing brokers and top-tier brokerage agreements, Mercer says.
“That’s what the world’s economies and capital markets are based on,” he added.
When LMAX launched the LMAX Digital institutional crypto hub in 2018, Mercer expected a similar infrastructure in digital assets to emerge quickly. Eight years later, he believes his absence remains one of the industry’s biggest limitations.
Mercer remains an enthusiastic supporter of blockchain technology, citing instant settlement and transparent on-chain ledgers. But while atomic settlement and delivery-versus-payment transactions are valuable, he argues that they are not enough for global capital markets.
“Today’s world is based on leverage and credit, and it will continue to be that way,” Mercer says.
The problem of guarantees
A central challenge is the inability to efficiently move collateral between traditional and digital financial systems.
Today’s institutions often operate within separate regulatory and operational environments, with traditional assets, digital assets and stablecoins trapped within distinct “walled gardens.” Collateral cannot move freely between them, reducing capital efficiency and limiting participation.
Market volatility during the first quarter highlighted the problem, Mercer said, as investors rotated between stocks, gold and bitcoin in response to macroeconomic uncertainty.
“If you have previously positioned fiat money on a centralized exchange, you can’t necessarily deploy that collateral elsewhere when opportunities arise,” he said.
