Written by: Justin Walsh
The sixth annual Boston Fintech Week, hosted last month by the Fintech Sandbox, brought together thousands of leading voices within the global financial technology sector. Over the course of the week, a multitude of sessions offered a glimpse into the future of cryptocurrencies and blockchain technologies in financial services. Here is a look at the most frequently discussed topics among attendees and speakers.
Big Opportunities
Reducing Cross-Border Friction
By using stablecoins, blockchain enables near-instantaneous cross-border payments without the need for intermediaries to facilitate the transaction. Simply put, stablecoins are a digital currency that is “pegged” to a more stable asset, such as the US dollar. Using stablecoins to transfer value across borders results in quicker settlement times for the associated funds and significantly lower fees, when compared to traditional methods, such as wire transfers or remittances.
Facilitating Complex Payments with Shared Business Logic
Blockchain can support payments that require computational logic. Smart contracts can store conditional statements (If X, then Y), and be programmed to execute once the conditions are met. Furthermore, these smart contracts can facilitate transactions involving multiple parties using permissioned, or in some cases, public blockchains.
Reducing Reconciliation Costs
Since blockchain provides a shared, immutable ledger, it can significantly reduce reconciliation time and costs by acting as the sole source of truth. Smart contracts can automate aspects of invoice reconciliation and payment settlement, reducing the likelihood of human errors, and lowering an institution’s administrative costs. Paul Brody, Global Blockchain Leader at EY, mentioned during his session that he recently worked with Microsoft to extend their enterprise blockchain platform for its rights and royalties management for Xbox gaming partners. Through the implementation of smart contracts, the solution reduced Xbox’s invoice processing time by a staggering 99%.
Providing Banking-Like Functionality for Things Besides Money
Brody also discussed the implementation of blockchain technologies throughout an organization for various objectives beyond financial transactions. There are functions within many organizations that could benefit from the same principles provided to money by blockchain. For example, blockchain’s ability to prevent double-spending could prove just as valuable to an organization’s inventory as it is for their balance sheet. For this reason, many believe there are immense opportunities for blockchain in operations, logistics, and supply chain management.
Key Takeaways
Common themes emerged from the event for those building blockchain-based solutions, according to industry experts:
- Build on Ethereum. It has become an industry standard, enabling easy interoperability with other Ethereum-built projects. Furthermore, its robust, well-established ecosystem provides strong security and data integrity, in addition to vast community and developer support.
- Carefully consider privacy, regulatory compliance, and risk mitigation from the beginning. Considering these principles as an afterthought to development can lead to costly legal consequences, data breaches, operational inefficiencies, and damage to an organization’s reputation down the road.
- Advocate for greater regulatory scrutiny. While state and federal governments have started to pay more attention to cryptocurrencies and blockchain, there is still uncertainty when it comes to regulatory guidance in both the United States and abroad. The onus is likely on the private sector to assist government agencies in establishing a common, actionable set of regulatory standards to protect businesses and consumers alike.
As you consider crypto and blockchain opportunities, you may find yourself running into some roadblocks. Wolf’s crypto and blockchain team can help with audit, tax, compliance, IT assurance, or cyber needs – reach out today.
