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Is there a case for utilities in blockchain?

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Many people I have talked to, mention "securities settlement" as an area suitable for lots of cost savings through the adoption of blockchain. But as we know, settlement is an area that does have a lot of intermediaries such as brokers/ custodians/ etc.

Question is - given the peer to peer nature of blockchain, will all the intermediaries in today's financial world get disintermediated? After all, banks are also intermediaries in some sense - if you look at them as custodians of your cash who give you access to a suite of financial services for parking your cash with them.

Digital nerds innovating in blockchain dream of a network with no intermediaries and regulation. However, it might just be a pipe dream. Bitcoin (without intermediaries) is still an experiment carrying live transactions. There are limits to its scalability as well. Even fintechs such as Align Commerce that try to move money through Bitcoin, have embarked on being an intermediary themselves (Align Commerce will follow all AML checks before allowing you to transfer funds through Bitcoin network). Ripple's blockchain network is another example where the correspondent banks remain as intermediaries to the transactions; only the way they acquire forex transactions changes and they have access to much wider scope of transactions than today.

Let's take payment screening for example. The current thinking is that banks and other nodes connected to blockchain networks will perform their own screening at the gates where value enters and leaves the blockchain networks. And the regulators are totally separated from this flow. However in future, a case could be made for utilities that can be part of blockchain networks performing all these screening functions on behalf of other participants. This could significantly bring down the cost of screening and other functions leading to real savings in the cost of fulfilling payment transactions. Similarly in settlement, today's powerful intermediaries are likely to find some niche role for themselves in blockchain networks as well.

One could argue that such utilities would be "interceptors", not "intermediaries". Either way, they would continue to add value to blockchain networks by removing the need for replication of functions and investments across network participants. Their power might be reduced as they may not be able to exert power by holding on to information from others given that blockchains promote data transparency. Nevertheless, they are likely to add value.

What do you think? Interceptors or intermediaries will remain or die when blockchains become prevalent?

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