Can Blockchain Build a Better Bank? Experts Weigh In—The Ledger

July 9, 2019, 3:43 AM UTC

Can blockchain build a better bank?

That was the subject of a roundtable discussion I attended (and co-programmed) at Fortune's inaugural Brainstorm Finance conference last month. The conversation, moderated over lunch by my colleague Jeff Roberts, was a wide-ranging one. It covered the evolution of decentralized technologies, the path forward with respect to regulation, and a host of other related topics.

Here's a sampling of what the speakers had to say.

The first theme to emerge involved decentralization versus centralization. Adam White, chief operating officer of Bakkt, the New York Stock Exchange's sibling cryptocurrency venture, said that highly regulated industries, such as finance, "trend toward centralization," and that's just fine. To critics who denounce projects that are not fully decentralized, he said, "you're missing the whole point." His argument: Centralized services can provide better customer service. White noted that centralized cryptocurrency exchanges (his former employer, Coinbase, comes to mind) are better at aggregating liquidity than decentralized ones and, therefore, they perform better.

Amber Baldet, CEO of Clovyr, a startup that aims to help people experiment with blockchains and the like, said it's tricky to measure, or even define, decentralization. Rather than focus on single metrics—such as the distribution of nodes on a network, or the size and number of developer teams associated with a given project—people had better be on the lookout for "sticky power aggregation points," where value accrues. "More than just talking about, Are we decentralized yet?, maybe we should be looking at the supply chain of this whole process and figuring out who's getting sticky, who's just replacing this new guard with the old guard, and where power is shifting," she said.

Regulation was another theme of the day. Perianne Boring, founder of Chamber of Digital Commerce, a blockchain trade group, said it is important for everyone—from established banks to upstart fintech firms—to band together and persuade regulators, especially in the U.S., to encourage the development of cryptocurrencies and related technologies. "It is absolutely imperative that we figure out ways that our elected officials and those that serve in the highest powers of government understand what this is going to mean to our future, for everybody," she said. "We should be unifying our voices and ensuring that this is a national priority."

Cromwell Coulson, CEO of OTC Markets, a financial firm that deals in over-the-counter securities, agreed, urging people to visit Washington, D.C. "We have a chance here to engage regulators, to put pressure on legislators, because democracy is, by its nature, decentralized," he said. "Instead of just complaining about the U.S. system, be part of it and move it forward."

Others were less thrilled with the prospect of regulatory deliberations. Micah Winkelspecht, CEO of Gem, a cryptocurrency portfolio tracker, said that he came into the cryptocurrency industry because he "believed in the original vision and mission" of decentralization, of being one's own bank. But as the discussion has shifted to regulating cryptocurrency custodians and other intermediaries, he has felt as though policymakers have become "shortsighted."

"In the grand, long scheme of things the technology will improve," Winkelspecht said. "We will find solutions to a lot of the problems that caused centralization"—and many resulting legal questions—"in the first place."

All in all, the session could not have been better timed. The roundtable came a day after Facebook debuted its controversial plans for Libra, a globe-spanning cryptocurrency. Vinny Lingham, CEO of Civic, a blockchain-based identity firm, and partner at Multicoin Capital, a cryptocurrency-focused investment firm, took a dig at anyone overly preoccupied with the legal niceties that dominated much of the conversation. "You're worrying about protecting the existing financial system," he said. Facebook "is building a new one."

Ultimately though, it was Clovyr's Baldet who summed up the discussion best at its conclusion: "The technology is moving way faster than these conversations ever will."

Whether or not blockchains will indeed enable better banks to be built, there's no doubting the commitment of those technologists trying.


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To the Moon… Goldman Sachs Coin could be a thing. Fidelity International plays blockchain game. KKR cofounder invests in cryptocurrency fund. The Hong Kong dollar is crushing it. Chinese central bank's interest in cryptocurrency is renewed. Japanese central bank is wary of Facebook's Libra. Bitmain cofounder starts new company, Matrixport. Brazilian investment bank inks deal with Tezos. So. Many. Jobs. The Fed might lower interest rates again? Binance U.S. taps ex-Rippler as CEO. Bitcoin futures soar at CME. Bitcoin: a safe bet?

...Rekt. Deutsche Bank is cutting 18,000 jobs. Hedge fund billionaire faces sex trafficking charges. Banks are in no hurry to get involved with Facebook's Libra cryptocurrency. UK proposes banning cryptocurrency-based derivatives. Fewer stock buybacks means more volatility. Britain proposes fining British Airways 1.5% of global revenues for data breach. Cuba studies cryptocurrency. Russian bank bails on blockchain. Bitcoin uses as much energy as Switzerland. Hackers loot 7-11 Japan payment app. "Influencers pay double." Altcoins are...not doing well.


On this week's episode of Balancing The Ledger, podcast entrepreneur Laura Shin lays out the state of the cryptocurrency media industry with Fortune's Robert Hackett and Jeff Roberts. The three discuss journalism ethics, the threat posed by tech monopolies, and the promise of micropayments.



That's labor's share of gross domestic product in the U.S. Before the 2000s, workers' share of the nation's economic output—the percentage that accrues to workers in the form of compensation, that is—held relatively steady at around 65%. Most people assume technology is causing the dramatic downshift.

"For the first time in modern history, automation isn’t necessarily good for workers overall," writes Fortune's Geoff Colvin.


Initial cheese offering. Cryptocurrency fans (and critics) have long poked fun at Chuck E. Cheese tokens, the funky chain's proprietary arcade money. Ryan Hoover, creator of Product Hunt, did just that when he tweeted out a link to a game that rewards people in Bitcoin, saying, "Chuck E Cheese tokens are cool and all but I’d rather earn Bitcoin."

For Mr. Cheese, it was the last straw. The restaurant's namesake mouse got testy in a post on Twitter, leading to a bevy of online altercations, which the Wall Street Journal dutifully chronicled.

To adapt a piece of wisdom from the Bible: Render unto Cheese's what is Cheese's.


Stealing from the rich. Remember when Robinhood, the fee-less stock trading app, last year debuted a supposed checking and savings service that paid 3% interest? The product launch proved to be such a debacle that the company withdrew it and instructed employees to delete anything they had posted about it. Business Insider interviewed 10 former Robinhood employees and contractors to figure out how the release went so terribly wrong.

"Like Theranos23andMe, and Uber before it, Robinhood sought to disrupt a highly regulated industry with the "move fast and break things" startup playbook, only to learn that the rules are there for a reason, and that breaking them has consequences. Business Insider has learned that the company was warned that the checking and savings accounts might not meet regulatory scrutiny but pressed ahead anyway."

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