An in-depth report from Morgan Stanley's research analysts has concluded that any "disruptive" effects of blockchain technology will not be felt in the near term, contrary to the vociferous proponents of the various 'solutions', also known as distributed ledger."We think five to ten years off for widespread adoption and not material to 2017/18 earnings of any financial we cover," the analysts predicted, adding that they expected "proof of concept tests in 2017/18."At the heart of the report was this question: "will distributed ledger help or hinder financial institutions?"The bullish case is that sharing and decluttering of infrastructure could radically reduce costs and provide much needed boost to equity returns."Let's be clear, for many banks, especially investment banks in 2016, a radical reduction and simplification in processing costs would be a blessing," observed the Morgan Stanley analysts."According to Santander, more efficient digital ledgers could cut costs in the banking industry by up to US$20 billion a year," they said. "The bearish case is that dramatic reduction in margins at the same time as higher IT spend is destabilising and disruptive. It also risks profit pools leaking to other players."That is, services providers who run aspects of the blockchain sector may reap a large chunk of cost savings. In addition, the Morgan Stanley report suggested that 'shared utilities' (for 'Know your Customer', securities processing and the like) are likely to have a bigger impact on bank earnings in 2017-19 than blockchain implementation.They did warn, however, that the benefits in some parts of the financial services sector would be real, and that Australia was a market to be watched, saying "the best use cases in financial services strike us as post-trade - especially for loans, CDS and securities more broadly." "Payments [are] much further off, although we keep a close watch on Ripple and its cross-border payment offerings which look to bridge faster domestic payment systems between countries."Watch two experiments closely: first, the dematerialised and simpler markets [ie, fully digitised] such as Australia and Singapore first for broad market initiatives; second, a cumbersome process where cost savings could be large (such as bank loan settlement) for signs of progress."The Morgan Stanley report did, however, warn that the vested interests clustered around the T+3 carry trade settlement for financial instruments would prove to be a hurdle."For custodians such as BNY Mellon, State Street, Northern Trust, Citi, JPM, which generate profits from ensuring securities are accurately measured and moved and which benefit from the carry [set at T + 2 or 3], blockchain technology threatens their value add. "Shorter settlement periods could cut into revenues more than they could free up capital for buybacks - but that's why the custodians are at the leading edge of distributed ledger work to ensure that they can deliver the most efficient blockchain solutions to their clients."