Shift November 28, 2018

Shorting on blockchain predictions

Koen Vingerhoets

Project Coördinator Blockchain, Belfius

Satoshi Nakamoto, the still unknown genius behind the bitcoin, wrote a whitepaper in 2007-2008 to tear the banking world apart. About 10 years later, only a blindfolded bitcoin maximalist might still believe in the disruption he foretold.

The crypto ecosystem, now bulging with real hard cash, is looking for a way out of the trenches into the world of mainstream finance. Of course some start-ups still love to disrupt everything, but let’s be honest, the entire token market is a Ponzi scheme led by an in-crowd whose only aim is to separate fools from their money.

The challenge is more or less akin to that facing the mob: how to attain a level of decency. Money, of course, buys a lot: (former) members of regulatory bodies, government authorities and financial institutions accommodate shady organizations to give them some level of credibility.

Crypto issuers are going a long way to add insurance, additional security and implement anti-money laundering laws. They are even adding know-your-customer scenes to make themselves ressemble the once so hated and derided world of finance. With multiple ETFs on the table of the American regulator, crypto-based futures will make it one day in 2019.

To involve a greater audience, the focus must shift from making money to making happy customers. The most recent payment apps and cards have made quantum leaps in that area. Onboarding is becoming user friendly and PSD2 will open up the traditional banking world. If the customer can be seduced with a smooth financial experience (payment, remittance, loans, insurance, investments) in a regulated environment, the shift will happen.

The current revolution in the attitude of (serious) crypto-based organisations is so astonishing that I assume broader acceptance and even regular use of crypto tokens will emerge in 2019. For a long time already, the financial world has been pleading for “same business, same rules”. Once it arrives, it will be time to stop nitpicking and start a constructive dialogue to explain the rules of the financial game.

Blockchain

The financial world has generally cooled its attitude to blockchain projects. Return on investment only happens after many years; some experiments were simply too experimental or did not match with the strategy. It is easier to launch projects with immediate customer value or visible results. Blockchain still sounds too utopian. Nevertheless, the ripple created by bitcoin is still spreading: other industries, especially those with long supply chains, are eyeing this brand-new technology for uses outside the realm of finance. In the same way that bitcoin isn’t the best implementation of blockchain technology, the financial industry might not be the most fertile soil for blockchain projects. Time will tell. 

It has been a long wait in the financial sector: banks have been running blockchain proof of concepts and pilots since 2014. Early predictions posited 2016 as the year when projects would go live, but 2019 has turned out to be a more likely bet. Several projects in the field of trade finance are already running small live pilots, with move to mainstream use expected for the end of 2018 or early 2019.

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