These markets work because trading activity relies on a broad network of credit relationships, clearing brokers and prime brokerage agreements, Mercer says.
“This is what global economies and capital markets are built on,” he added.
When LMAX launched institutional crypto site LMAX Digital in 2018, Mercer expected similar infrastructure to quickly emerge in digital assets. Eight years later, he believes his absence remains one of the biggest constraints in the industry.
Mercer remains an enthusiastic supporter of blockchain technology, citing instant settlement and transparent on-chain records. But while atomic settlement and delivery versus payment transactions are valuable, he argues they are not enough for global capital markets.
“The world today is built on debt and credit, and it will stay that way,” Mercer says.
The problem of guarantees
One of the main challenges is the inability to effectively move collateral between traditional and digital financial systems.
Today’s institutions often operate in distinct regulatory and operational environments, with traditional assets, digital assets, and stablecoins trapped in separate “walled gardens.” Collateral cannot move freely between each other, reducing capital efficiency and limiting participation.
Market volatility in the first quarter highlighted the problem, Mercer said, as investors switched between stocks, gold and bitcoin in response to macroeconomic uncertainty.
“If you have fiat pre-positioned on a centralized exchange, you can’t necessarily deploy that collateral elsewhere when opportunities present themselves,” he said.
