On Monday 3 October 2016, like other FinTech observers, I attended The Blockchain Conference for Finance, an event hosted by the FinTech Network in London and one that attracted a range of finance professionals, as well as FinTech experts. The conference highlighted the key challenges and opportunities facing organisations that are looking to harness the power of Blockchain.
The big picture
The event consisted of three well designed sections and it kicked off with the strategy around Blockchain in finance, followed by the regulatory environment, to conclude with the technology’s current applications.
The flow allowed for ideas and conceptualisations of the technology to be displayed for all to see, followed by an in-depth discussion on how Blockchain could change the financial landscape. As quoted during the conference, Joi Ito, Director of MIT Media Lab, said: ‘Blockchain will be to banking what Internet was to the media’; even though the idea is definitely attractive, we were once again left with the question, ‘When will Blockchain be more widely used in the industry?’
The Blockchain industry is currently valued at over US$200 Million, whereas the return on investment for the financial services businesses is expected to be phenomenal. However, so far only pilots have been run, in a safe and secured test environment, which is far from reflecting the reality in the market. Consequently, it is only natural that there is scepticism amongst different experts and players within the industry as well as from outside.
Technicalities aside, other concerns need to be addressed as well, one of such being regulations, trust and security. Indeed, those three areas are believed to determine the success or failure of the technology. For example, the Federal Reserve recently stated ‘paying close attention’ to the DLT (Distributed Ledger Technology). The Federal Reserve is obviously interested in finding out if the technology will increase or reduce risks, but also ‘whether the risks are rendered more or less opaque’. Until those questions are answered and fully addressed, it is unlikely that the technology will be widely implemented.
Finally, discussion after discussion brings us to the following reality: agreed international standards and collaboration of key players are needed for Blockchain to succeed and breakthrough in the next couple of years.
Where do we go from here?
Even though this conference helped to cut through the hype and explored use cases for Blockchain, sceptical speakers highlighted the bumps in the road such as regulatory uncertainty (according to the EFMA Deloitte survey, 49% of European finance professionals point out regulatory uncertainty as their biggest concern), the cost of the technology and its application and who should pay for these.
Blockchain has raised a lot of questions and insights, applications are created and launched regularly to address current financial needs (e.g. Barclays and its credit letter between Ornua and Seychelles Trading Company, or more recently Visa’s cross-border payments project). Experts believe that the technology is ripe to change the financial landscape, but its estimated timeline and success won’t just depend on the desire to make Blockchain happen, but on the willingness of all players to change their current mindset and to open up to new processes based on trust, decentralisation and transparency, which Blockchain offers.