Crypto highlights of the of the DLA Piper report include:
31% of Financial Services firms believe central banks will hold Cryptos on their balance sheet in the next five years
18% expect central banks to establish their own Cryptocurrency
17% of asset managers have or are considering a strategy to invest in Cryptos – given the infancy of this asset this illustrate how fast the market is evolving
“Governments are starting to explore using some form of digital currency underpinned by blockchain, because it leaves a digital footprint, and they can therefore track where the money is going. It also enables them to more easily collect taxes.”
Jonny Fry, CEO & Co-Founder TeamBlockchain
TeamBlockchain is a professional advisory firm working with enterprises and organisations to help them understand and navigate the challenges and opportunities of the blockchain and ‘tokenomics’ disruption to our economy and financial system. CEO and Co-Founder Jonny Fry, quoted in DLA Piper’s report, picks up on some key highlights and surprising findings around the evolution of disruption in Financial Services, the shifting landscape of regulation, payments, cryptocurrencies, cybersecurity and market sentiment.
- 69% of retail and investment banks feel they are being impacted by disruption
- 72% of the firms surveyed have changed their customer journey in the last two years
- 33% of firms have engaged with FinTech firms and 55% intend to so within the next two years
- 74% of firms cite regulation and compliance as a factor in restricting greater adoption of technology and new business models
- 31% of participants expect central banks to add Cryptos to their balance sheets in the next five years
- 82% of firms are worried about cybersecurity
Jonny Fry comments, “The report highlights the considerable interest in investing in payments technology, an area that has attracted the attention of blockchain and cryptocurrencies. One such example is the current disruption of the SWIFT system, a leader in cross-border payments, by Ripple. More than 100 banks have signed up with the blockchain based challenger.
“It is not surprising therefore to see that Blockchain is on the agenda for 50% of investment banks and 32% of retails banks. Those are the projects reported in the media and one cannot help wondering whether these numbers aren’t in fact higher. Some banks clearly see opportunities.”
The report quotes Stephen Albrecht, general counsel for strategy and operations group at Barclays as saying, “One area we are particularly interested in is the utility settlement coin (USC), which is a blockchain application that will link banks to central banks”. Stephen continues, “This involves moving funds between banks and central banks using a blockchain that moves tokens around, rather than settling cash.”
Regulators must embrace innovation
According to the DLA Piper report, 80% of participants in Singapore and 57% in the UK score their regulator as four or five (out of five) in terms of progressiveness in helping to foster innovation. In contrast, the equivalent figures for participants in the US and Hong Kong are 21% and 18% respectively.
In response, Jonny says, “Given the $100billion of fines globally between 2008 and 2017 for banks in relation to KYC and AML shortcomings, Financial Services companies have been concerned they will face KYC challenges around cryptocurrencies. Ironically, blockchain technology can optimise the AML process and there is increasing evidence that blockchain based systems are more reliable and effective than traditional paper-based systems.”
Roland Emmans, UK technology sector head at HSBC comments in the DLA Piper report, “The power of the distributed ledger is that it can remove regulatory problems.” He adds, “Today, the regulator wants to know who is making the payment, where it comes from, where it has gone and what information has been attached or stripped from it. The distributed ledger technology will be able to tell you all this. It is one version of the truth without having a central system where things can be stripped out.”
According to the report, 27% of financial services firms questioned cite consumer trust as the main obstacle to payment innovation. . Jonny says, “One suspects this is because currently the user experience of dealing with Cryptocurrencies is not an easy one and many of the currency incumbents are not household names. However, once we see global brands such as Facebook, Amazon, Google, Apple, IBM or Uber launching their own Cryptocurrency this may well change and present a huge challenge to the banking sector.”
Jonny concludes: “Cybersecurity and protecting data are a major issue cited as major concerns by over 80% of firms interviewed. However, with 34% of firms looking to further monetise their client data, will this lead to further cross selling? While GDPR has forced firms to look at what data they hold and why, this does raise the question, if having access to data is so valuable, why are companies not recognising the data as an asset on their balance sheet? I wonder whether, given the potentially crippling fines the Information Commissioners Officer can levy, 4% of worldwide turnover, and the constant threat of data hacks, makes holding data a liability. Either way, one can see the inherent appeal of having data held on a distributed basis, meaning not reliant on one firewall on one location, using military grade cryptography, hence the attraction of using blockchain technology.”
For a copy of the DLA report please visit www.dlapiper.com/fsdigitaltransformation.
TeamBlockchain Ltd offers organisations strategic insight, technical expertise and tactical advice into Blockchain and Tokenomics to help firms understand these powerful tools to determine why, if and how they can be utilised to improve their operations. TeamBlockchain also can provide an overview of the Crypto market, the advantages and risks of entering the sector in a particular industry and how regulation is evolving as they work with a range of private and public companies.
TeamBlockchain provide access to relevant experts and support and guidance around:
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