Blockchain technology will not disrupt the financial services sector in the near term, according to panellists speaking at NeMa.
“Seeking some detail to cut through the hype,” moderator Keith Tippell of SWIFT asked the panellists whether distributed ledger technology is going to be totally disruptive.
Stephen Bayly of HSBC suggested that if attendees believe all of the hype surrounding the technology, “it could be very disruptive”. However, he argued that there are so many differing and speculative perceptions of how it will be adopted that nothing particularly disruptive is likely to happen in the near-term.
Justin Chapman of Northern Trust added to this, saying that all businesses need to evolve to stay relevant in a modern environment. Calling it a ‘change in culture’, he suggested that technology such as blockchain allows for such evolution.
When the audience was asked which custody services are most likely to move into blockchain first, 58 percent of respondents said settlement and 13 percent answered asset servicing. However, 28 percent said it will be a different, new service.
Bayly suggested that blockchain will be adopted in areas that are not currently very automated, and where revamping the technology would not mean increasing costs, while Euroclear’s Angus Scott agreed that it will be adopted in areas where there is value to be gained from using it.
Scott said this is likely to be in areas where currently data is not shared efficiently, and that through adoption and usage, industry standards will evolve. Firms will “find ways to make it operate, find ways to make it valuable”, he said.
Regulation was identified as the biggest barrier to adoption of blockchain. In another poll, 49 percent of respondents identified this as the biggest ‘blocker’, while 22 percent said it was finding a compelling business case. Security and interoperability were also identified as issues, receiving 16 percent and 13 percent of the vote, respectively.
The panellists generally agreed that regulators themselves have been supportive of blockchain developments, however, Scott suggested that there are not currently many concrete use cases for it, and not many concrete business strategies for regulators to either approve or deny.
Chapman also identified legal issues around the amount of intellectual property being generated through industry collaborations and proof-of-concept testing, as well as the amount of open-source software being given away.
A final barrier to blockchain was identified by Bayly, who suggested that, as the technology is still relatively young, “there isn’t a large pool of expertise to draw from”.
Currently, he said, the technology is not in a position to completely change the industry, and that in this regard, firms should not try to run before they can walk.
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