But lack of trust and regulatory uncertainty means few businesses have fully committed. Here’s a look at where companies are in their blockchain journey, and four strategies for navigating this new world.
Signs of the new blockchain world
Tokenised everything The representation of real or virtual assets on a blockchain is spreading to raw materials, finished goods, membership rights, and more. These digital tokens will transform company processes and usher in new business models.
ICOs are self-funding the tech Initial coin offerings, in which a company sells a predefined number of digital tokens to the public, are a growing alternative to classic debt/capital funding. They’re raising billions of dollars for the development of blockchain technology platforms.
ERP + blockchain Enterprise software platforms that are the engine for company operations like finance are beginning to integrate blockchain. Using blockchain with their ERP systems, companies can streamline processes, facilitate data sharing, and improve data integrity.
New leaders emerge Our survey respondents still perceive financial services to be the current and near-term future leader of blockchain, but other industries are on the rise (see the diagram above).
It’s hard to trust blockchain
By design, blockchain can foster trust. But in reality, companies confront trust issues at nearly every turn. 45% believe lack of trust among users will be a top barrier.
This study provides an empirical overview of the current state of both enterprise and public sector use of blockchain and distributed ledger technology (DLT). The study gathered data from over 200 enterprise DLT start-ups, established corporations, central banks and other public sector institutions, including non-public data obtained through confidential online surveys.
The study also explains the concept of ‘blockchain’ and DLT, highlights the different DLT architectures, and dives into governance-related issues. Finally, an entire section is dedicated to investigating how the public sector is approaching DLT.
Key Highlights Of The Report
Significant growth of the enterprise DLT ecosystem: at least 115 DLT start-ups employing more than 2,000 people are active in the ecosystem, in addition to large established corporations that increasingly set up entire business units and research labs exclusively dedicated to DLT
The protocol layer is slowly maturing: several dozen start-ups and established corporations are building and improving the core infrastructure (protocol frameworks,
core building blocks), but ‘immature technology’ is still considered one of the key challenges to broader DLT adoption
Only limited network and application deployment to date: the vast majority of users are experimenting with small-scale, isolated networks; live applications are mostly built as ‘permissioned layers’ on public blockchains
Majority of use cases focus on financial services: the majority of enterprise DLT companies are targeting financial and insurance-related use cases and actors, but increasing attention is being given to non-monetary applications (e.g., identity, supply chain, intellectual property)
Trend towards opening core infrastructure platforms: an increasing number of companies are open-sourcing their codebases, shifting monetisation of the platforms to higher stack levels (e.g., consulting, application development, support)
Key challenges to broader DLT adoption remain: unclear regulatory environment and legal risks are most often mentioned as key challenges; study participants consider privacy and confidentiality to be more of an issue than scalability and performance concerns
Interoperability still in its infancy: the current landscape is fragmented and comprised of incompatible protocols, but there is an increasing focus on developing common standards via the joint development of enterprise DLT frameworks by a variety of consortia
Significant public sector DLT activity observed: local, regional, national and multilateral institutions are all engaged in DLT-related activities; 77% of countries represented in the study have multiple institutions showing an interest in DLT
Public sector institutions are experimenting with a variety of DLT protocols: 63% of central banks and 69% of other public sector institutions (‘OPSIs’) have already been involved in proofs of concept and/or running trials; OPSIs are generally further ahead than central banks
Ethereum has been widely tested at central banks: 57% of central banks are experimenting with either the public Ethereum network or a permissioned version
Existing DLT deployment plans: 15% of OPSIs plan to deploy DLT-based applications this year, and another 23% plan to do so within the next two years; the timetable for central banks is more conservative than for OPSIs
Which control principles are essential for blockchain adoption on a global scale?
Since its mention by Satoshi Nakamoto in the 2008 white paper ‘Bitcoin: A Peer-to-Peer Electronic Cash System’, blockchain technology, also called Distributed Ledger Technology (DLT), has attracted significant attention among the global financial services community. Researchers and investors are increasingly interested in the transformative and disruptive ability of this technology to:
Facilitate an exchange of value
Enable the safe storage of value
Achieve operational efficiencies
Secure cost savings
Increase industry transparency
Enhance customer experiences
In this paper, we consider three macro factors which we consider essential to the widespread adoption of private DLTs within the financial community in the long term. These macro factors are:
Legal and Regulation
Although this paper discusses each factor in isolation, financial institutions should view all three as interdependent and complementary when considering DLT adoption.
When introducing DLT into the enterprise, it is essential that the DLT system is capable of integrating and interoperating with other systems, including other blockchain solutions or technologies. Even within individual DLT implementations, the blockchain component is likely to be a single part of a larger whole, with additional data stores, messaging systems, interfaces and touch points to both internal and external systems. Institutions therefore need to ensure that all systems are capable of interconnecting and communicating with one another.
The digital asset ecosystem has experienced significant growth over the last year. Since January 1, 2017, the total market capitalization of all digital assets has increased nearly 10x to reach a current valuation of approximately $180 billion. We have also seen the number of assets, breadth of companies, and amount of capital grow significantly:
There are more than 1,100 digital assets listed on exchanges
Over 100 crypto hedge funds have collectively raised over $2 billion of capital
Venture firms have invested more than $800 million into digital asset startups
Customers often ask us how we decide which assets to support. By sharing this framework we hope to improve transparency and highlight the factors we evaluate when considering which new assets to support on GDAX.
This framework is not intended to be a definitive methodology, investment advice, or a commitment to support any specific asset. As the technology, use cases, and regulatory environment evolve, so too will this framework. We are committed to supporting more assets, but our priority is always to protect customer funds and comply with regulatory requirements.
New cryptocurrencies are emerging almost daily, and many interested parties are wondering whether central banks should issue their own versions. But what might central bank cryptocurrencies (CBCCs) look like and would they be useful? This feature provides a taxonomy of money that identifies two types of CBCC – retail and wholesale – and differentiates them from other forms of central bank money such as cash and reserves. It discusses the different characteristics of CBCCs and compares them with existing payment options.
In less than a decade, bitcoin has gone from being an obscure curiosity to a household name. Its value has risen – with ups and downs – from a few cents per coin to over $4,000. In the meantime, hundreds of other cryptocurrencies – equalling bitcoin in market value – have emerged (Graph 1, left-hand panel). While it seems unlikely that bitcoin or its sisters will displace sovereign currencies, they have demonstrated the viability of the underlying blockchain or distributed ledger technology (DLT). Venture capitalists and financial institutions are investing heavily in DLT projects that seek to provide new financial services as well as deliver old ones more efficiently. Bloggers, central bankers and academics are predicting transformative or disruptive implications for payments, banks and the financial system at large.
Lately, central banks have entered the fray, with several announcing that they are exploring or experimenting with DLT, and the prospect of central bank crypto- or digital currencies is attracting considerable attention. But making sense of all this is difficult. There is confusion over what these new currencies are, and discussions often occur without a common understanding of what is actually being proposed. This feature seeks to provide some clarity by answering a deceptively simple question: what are central bank cryptocurrencies (CBCCs)?
To that end, we present a taxonomy of money that is based on four key properties: issuer (central bank or other); form (electronic or physical); accessibility (universal or limited); and transfer mechanism (centralised or decentralised). The taxonomy defines a CBCC as an electronic form of central bank money that can be exchanged in a decentralised manner known as peer-to-peer, meaning that transactions occur directly between the payer and the payee without the need for a central intermediary.3 This distinguishes CBCCs from other existing forms of electronic central bank money, such as reserves, which are exchanged in a centralised fashion across accounts at the central bank. Moreover, the taxonomy distinguishes between two possible forms of CBCC: a widely available, consumer-facing payment instrument targeted at retail transactions; and a restricted-access, digital settlement token for wholesale payment applications.
L’influence des banques et acteurs établis se renforce avec la maturation d’un certain nombre de projets innovants, notamment dans le domaine de la Blockchain
Les FinTech désignent communément un ensemble d’initiatives technologiques innovantes qui ont eu lieu, pour l’essentiel au cours des cinq dernières années, dans le domaine financier.
S’inscrivant dans une tendance générale d’automatisation et de rationalisation des métiers de la finance, notamment en matière de gestion de la relation client (BtoC) et de traitement des opérations financières (back office), et de nature à favoriser l’organisation de marchés d’instruments non cotés, l’innovation y est généralement susceptible de survenir à deux niveaux : celui, le cas échéant à service inchangé, des technologies mises en oeuvre, et celui d’une offre de services ou de produits susceptible d’avoir des effets substantiels (disruptifs) sur l’organisation et la structure des marchés.
Par métonymie, FinTech désigne aussi les sociétés, en général des start-up spécialisées dans le développement et/ou la promotion effective du recours à ces technologies.
Le degré de développement des FinTech varie selon les domaines considérés et les initiatives entrepreneuriales, en fonction des services proposés et des technologies employées. Des initiatives sont ainsi notamment identifiées en matière de paiement (et de crypto-monnaies), d’assurance, de planification, de prêt et finance participative (crowdfunding), de la Blockchain, de trading et d’investissement, de traitement et d’analyse des données, et de sécurité.
Des typologies peuvent utilement être établies sur la base des statuts réglementaires des services financiers offerts, qui relèvent en France, selon le cas, de la compétence de l’Autorité des marchés financiers (AMF) et/ou de l’Autorité de contrôle prudentiel et de résolution (ACPR).
À la suite d’une multiplication des projets, les tendances observées au cours de l’année écoulée montrent la maturation d’un certain nombre de projets, en particulier dans le domaine de la Blockchain. Dans ce contexte, différentes initiatives se précisent notamment pour ce qui concerne leurs modalités de financement, techniques et réglementaires.
L’AMF a présenté le 3 juillet 2017 à la presse sa cartographie des risques 2017, en présence de Benoit de Juvigny, Secrétaire général de l’AMF, Stéphane Gallon, chef économiste à l’AMF. Risques de remontée trop rapide des taux d’intérêts, de réappréciation brutale du prix des actifs, et affaiblissement de la coordination internationale ont été abordés.
France Stratégie, laboratoire d’idées public, a pour mission d’éclairer les choix collectifs. Son action repose sur quatre métiers : évaluer les politiques publiques ; anticiper les mutations à venir dans les domaines économiques, sociétaux ou techniques ; débattre avec les experts et les acteurs français et internationaux ; proposer des recommandations aux pouvoirs publics nationaux, territoriaux et européens.
Pour enrichir ses analyses et affiner ses propositions France Stratégie s’attache à dialoguer avec les partenaires sociaux et la société civile. France Stratégie mise sur la transversalité en animant un réseau de sept organismes aux compétences spécialisées.
Le département Développement durable et Numérique est chargé des politiques sectorielles (environnement, énergie, transport), du développement du numérique (technologie, implications numériques et sociales) et de leurs déclinaisons industrielles.
Il place, pour l’ensemble de ces sujets, le développement durable, en particulier la lutte contre le changement climatique et la préservation de la biodiversité, au cœur de ses préoccupations sans oublier pour autant la compétitivité industrielle et les questions de redistribution.
Dans le cadre de ses travaux, le département est amené à collaborer avec des organisations non gouvernementales, des universités et des entreprises ainsi qu’avec d’autres administrations et instances gouvernementales.
La blockchain, technologie sous-jacente à la crypto-monnaie Bitcoin, est inscrite à son programme de travail. Un groupe de réflexion ad hoc a été créé en vue de la production et de la publication d’un rapport à l’automne 2017.
How can blockchain and smart contracts benefit securitization?
We will explore in detail how potential benefits could play out at the different stages of the securitization lifecycle, but for now, here are some common themes to keep in mind:
One version of the truth. Blockchain enables a single, consistent source of information for all participants in the network. In an industry that currently faces inefficiencies around the storage, reconciliation, transfer, and transparency of data across multiple independent entities, this feature could be highly beneficial.
A complete, immutable, and traceable audit trail. From loan origination to primary issuance, servicing, and changes in ownership in the secondary market, blockchain can create a chronological and immutable audit trail of all transactions. With this capability, regulators and auditors could finally get a systemic view of the ownership of the underlying securitized assets. An issue that troubled the industry during the global financial crisis—determining who owned the title to some underlying assets—could be more easily resolved.
Better valuation and price discovery. The transparency facilitated by blockchain could reduce the information asymmetry and network disadvantages that some entities, especially smaller ones, currently face in the securitization industry. The resulting market efficiency could raise the investment appeal of securitized assets and deepen the potential pool of investors.
Speed and certainty. Blockchain, through its disintermediation and simultaneous recording of information across the system, can virtually eliminate time lags in information and payment flows throughout the securitization process, including in the secondary market. This increase in speed and certainty could significantly reduce counterparty risk, release capital, and reduce the return thresholds that investors demand.
Security. Blockchain’s capacity to increase the security of transactions and data, and mitigate fraud could be appealing to the securitization industry, where integrity of data is paramount. Blockchain’s immutable audit trail, for example, could permit every asset (and every transaction involving that asset) to be linked to a particular security, facilitating asset perfection and eliminating the risk of double-pledging assets.
The combined impact of all the above advantages—greater efficiency, speed, transparency, and safety for data and transactions—could lower risks in the securitization market as a whole and lead to greater investor interest. This in turn could improve prices, volume, and spreads. With better and more transparent information, regulatory compliance could also be simplified and market failures could become less likely.
With these general points in mind, we will now take a more detailed look at the specific places where blockchain could impact the securitization process, ranging from loan origination and loan servicing through the structuring, review, and initial sale of the security, to the servicing of the security, ongoing ratings monitoring, and secondary market trading. At each stage, we will look at some inefficiencies in the current process, then explore how blockchain is likely to change how the industry handles certain questions around its core functions and obligations, including data recording and dissemination, transaction execution, receiving and making payments, and regulatory compliance.
We will also look at why, despite the likely advantages, implementing a blockchain in the securitization industry may be challenging. We will conclude with a vision of a possible future state and with ideas about possible next steps.
According to our recent blockchain research, government organizations across the globe
are exploring use cases for blockchains that can impact their jurisdictions. With the support of the Economist Intelligence Unit, the IBM Institute for Business Value surveyed 200 government leaders in 16 countries on their experiences and expectations with blockchains.
Our research revealed that government organizations are looking at how blockchain technology can positively impact operations in a number of areas. For example, nine in ten government organizations plan to invest in blockchain for use in financial transaction management, asset management, contract management and regulatory compliance by 2018. And seven in ten government executives predict blockchain will significantly disrupt the area of contract management, which is often the intersection of the public and private sectors.
While virtually all government organizations surveyed intend to invest in blockchain by 2018, we discovered a small group of pioneers that are setting a fast pace and new direction with blockchains today. These Trailblazers, 14 percent of our survey, expect to have blockchains in production and at scale in 2017. They are prioritizing blockchains to help reduce innovation roadblocks and inaccurate or incomplete information across their organizations.
Trailblazers are focusing on blockchains to help reduce time, cost and risk in four areas: regulatory compliance, contract management, identity management and citizen services. Additionally, they expect blockchains will enable new business models, particularly in contract management, financial transaction management and identity management. These findings reveal that blockchain adoption is accelerating faster than originally anticipated, with government executives identifying key areas and benefits to explore.
In this report, we share key insights on market adoption of blockchain solutions. We also explore what differentiates early adopters – the Trailblazers – and how other government organizations can benefit from their blockchain explorations.