The Australian Securities and Investment Commission (ASIC) has explained how technology is changing the capital markets and where it could potentially end up in the future.

In his keynote address [PDF] to the Carnegie Mellon University in Adelaide on Wednesday, Greg Medcraft, chairman of ASIC, highlighted that the emergence of blockchain technology could -- if it takes off -- have the potential of changing the existing financial system.

Medcraft believes blockchain technology, the underlying system that facilitates bitcoin trading, could potentially change the financial system in four main ways: Automate the entire buy and sell process, including removing the waiting time to settle trades; eliminate the need for third-party intermediaries between buyers and sellers; reduce transaction costs; and improve access to cross border trading.

"Naturally, harnessing this potential will depend on the integrity, capacity and stability of blockchain technology and processes," he said.

"It will also depend on industry's willingness to invest in, and make use of, new ways of settling and registering transactions. The potential is, nonetheless, enormous. Industry is seeing that potential and is looking to see how it and the markets might benefit."

Commonwealth Bank of Australia's CIO David Whiteing made a similar point suggesting block chain could "change the way we view not just payments, but business processes".

"We also believe it will help and develop innovations we can't yet even think of," he said.

CBA has formed a consortium with other banks worldwide, including Barclays and the Royal Bank of Scotland, to design and develop "disruptive ledger" technologies based on the blockchain system.

Medcraft however warned that while there are opportunities with blockchain technology, there could be potential threats, too. He said that it is still unknown how blockchain will evolve but suggested it could "threaten" the trust and confidence investors have in the existing financial market.

"Blockchain potentially has profound implications for our markets and for how we regulate. As regulators and policymakers, we need to ensure what we do is about harnessing the opportunities and the broader economic benefits -- not standing in the way of innovation and development," he said.

"At the same time, we need to mitigate the risks these developments pose to our objectives. We also need to ensure those who benefit from the technology trust it. And, at the end of the day, we are working to ensure that investors and issuers can continue to have trust and confidence in the market."

The US Commodity Futures Trading Commission granted digital currencies the status of an official commodity on Thursday. The commission urged bitcoin operators must immediately ensure that their companies are legally registered under applicable trading laws and regulations.

Last month, the Australian Senate made a similar suggestion for bitcoin to be made an official currency, despite the fact that the Australian Taxation Office (ATO) had previously ordered for bitcoin to be treated as barter instead.

The Australian Senate Economics References Committee in its Digital currency-game changer or bit player report, argued that treating digital currencies as barter means it gets taxed twice, making its use difficult and uncompetitive.

"The committee is of the view that digital currency should be treated as money for the purposes of the goods and services tax," the report said.