Blockchain's backers concede it has been tainted by crypto
Blockchain’s proponents are weary of trying to convince others of the tech's potential, but they're still committed to hyping it.
“We might be a little bit ahead of ourselves with why everyone isn’t on the blockchain yet,” Amber Baldet, co-founder and CEO of Clovyr, told the audience at American Banker’s Block FS conference in New York on Thursday. “It’s going to take some time.”
As for exactly how long, the answer to that is complicated.
Though blockchain has proved useful in a wide variety of circumstances, particularly in the financial services arena, many bank executives and regulators still link the technology to cryptocurrencies' price volatility. Bitcoin's recent steep price drop only worsens that impression.
As of Friday morning, the value of the most famous cryptocurrency had dropped more than $5,500 in the past year. The price has recently rallied, but its continued volatility has caused bank executives and regulators to question cryptocurrencies and anything associated with blockchain technology.
Fidelity is one of the few major financial services companies to embrace and experiment with blockchain technology despite general cryptocurrency volatility. Tom Jessop, the head of Fidelity digital assets, said in the opening keynote address that the company has done “basic research and development” with blockchain for the past five years.
Cryptocurrencies and blockchain technology are "a very powerful development," Jessop said. “We’ll look back in history and say this was a very seminal event not only in finance, but history.”
One executive acknowledged that blockchain proponents will find better success by toning down the rhetoric about the technology.
Christine Moy, who leads JPMorgan Chase’s Blockchain Center of Excellence, said that while senior leaders see blockchain as “transformative,” a measured approach to what the technology can do for specific divisions within a bank must be taken into consideration.
“We’ve realized not everything needs to be on the blockchain,” she said.
“What contributes to the slowness of progress” in adoption by financial institutions “is that we are a large organization with a reputation with clients that we have to take care of," Moy said. "It’s not like with other startups in the space that can break things and apologize later."
“If we just lost hundreds of millions of dollars, we can’t just apologize and learn from mistakes," she said. "There’s a reason why you trust us, because we’ve built up that trust. It’s how we have to do things. We may not be the first to getting to a place with blockchain technology, but when we get there it will be the right way because we’ve thought about it.”
Blockchain proponents also need to sell regulators on the technology’s potential, observers said.
Jochen Dürr, chief risk officer and an executive board member at SIX, said his banking services company takes a collaborative approach with regulators in Switzerland and throughout Europe.
“Our approach is to move along in partnership with regulators,” Dürr said. “We take them along the process.”
Ram Komarraju, head of innovation and solution delivery at CLS, a financial market infrastructure provider, warned executives not to dismiss that concept because regulators, particularly those in the U.S., can be helpful with certain policies.
“There are a couple of areas where regulators are trying to help,” he said. “One of them is to bring clarity to certain terminology.” Komarraju said he appreciated that regulators are “publishing some valuable pieces of thinking” on topics such as tokenization.
Komarraju also said executives should keep tabs on how various governments experiment with blockchain, cryptocurrencies and fiat money.
He pointed to Bank of Canada’s experiments with cryptographic versions of fiat currencies. Bank of Canada has said in the past that central banks could benefit from such an approach.
Observers continue to preach patience with blockchain adoption because the technology will undergo multiple iterations.
“With blockchain, based on what the tech can enable, you’re working with something that can rewrite rules, rewrite relationships,” Moy said. “It’s going to take a long time, but it’s going to feel fast, if that makes sense.”