Since its inception just over a decade ago, blockchain has now matured to improve financial accessibility, lower costs and increase transaction speed.
Blockchain was the topic of discussion on the first day of the World Economic Forum 2022during an FT Live panel hosted by Stephen Morris, the Financial Times’ Banking Editor, in partnership with HCLTech. Rahul Singh, President Financial Services and Digital Process Operations from HCLTech was joined by Richard Nash, Head of Government Relations at PayPal and Brooks Entwistle, SVP of Global Customer Success and Managing Director for APAC and MENA at Ripple.
Blockchain take-off
All the panelists agreed that blockchain in financial services is taking off. It’s the best technology “adapted to improve financial services,” according to Entwistle.
Nash explained that over the last decade an array of exciting projects have been deployed that have “removed the traditional issues of the payments industry, which are identification and verification.”
“After learning to walk, PayPal is now ready to run in this crypto [and blockchain] space,” he added.
Entwistle agreed and said that Ripple was founded as a crypto and blockchain solutions company 10 years ago. It’s only now that is has achieved a “fiat-based network using blockchain and has been ‘cryptofied’.”
It’s taken nearly a decade to get to this point and Singh revealed that a lack of user acceptance is the main reason for this slow uptake.
He said: “The reason for slow user adoption is because the blockchain and crypto space is complicated and there is a lack of understanding on its impact. Until now, there has been a lack of use cases.”
With user adoption accelerating, there are significant implications for the nearly two billion people who don’t have access to banking services.
“If we can combine mobile, which 60% of the world’s population has access to, with blockchain and payment transfers, like Ripple, this increases the opportunity to spread financial services to unbanked people,” confirmed Singh.
Use cases, such as facilitating seamless and cheap cross border payments and providing insurance to the uninsured underpin the tremendous potential for blockchain to improve financial accessibility. But, they “need to be built up block-by-block,” added Rahul.
The regulation challenge
The slow-moving regulation landscape is also holding up both central bank and user adoption due to the complicated technology behind blockchain.
Nash explained that regulatory bodies and government scrutiny of crypto assets is stepping up.
“To accelerate blockchain adoption in financial services, governments and regulators need to get comfortable with crypto at scale. These policy and regulatory discussions are almost as exciting as the technical side of blockchain, and there is a real opportunity in the industry.”
He described “the US White House’s Executive Order on Ensuring Responsible Development of Digital Assets Executive Order as a turning point for the regulation of blockchain”, as it signifies a move away from the focus on the risks of the technology to the opportunities that it presents, which includes inclusion and equity.
As the largest financial market in the world, Morris – the panel host – highlighted this could be a significant moment for the adoption of blockchain in financial services.
Referencing Ripple Central Bank Digital Currency (CBDC) Pilot Test Bhutan Ripple’s work in Bhutan, Entwistle agreed and emphasized the importance of building relationships with regulators and governments and educating them on the value blockchain can bring to their citizens.
He said: “CBDCs are a great way for governments to understand the value that blockchain can bring to their citizens, but there needs to be greater interoperability between central banks and digital currencies.”
Singh added: “Regulation needs to catch up, but the reality of Central Bank Digital Currencies is not too far away.”
The carbon footprint
All the panelists agreed that reducing the carbon footprint of blockchain is something that needs to be addressed.
Nash said that PayPal is committed to “investments with partners to ensure efficient use of energy consumption.”
“The industry is conscious of the issue and the appetite to address it is strong,” he added.
Singh confirmed that “environmental costs must be kept in mind,” while Brooks concluded that blockchain “products must be built with sustainability features.”
