Near-term market implications: What is next, rather than beyond
TBR believes the intersection of public policy and commerce is the next area where technologists will apply their energies within the blockchain realm. The core platform elements are in place with clearly articulated road maps for ongoing development work. At issue will be the policy regulations and compliance methods needed to ensure blockchain-enabled business activity can be seamlessly imported into legacy systems of record for financial reporting purposes.
Similarly, nation states and native-cloud platforms such as Facebook will vie to become the de facto economic exchange mechanism for blockchain transactions. Notably, Libra Association, the Facebook-created digital currency, recently named former U.S. Department of the Treasury Under Secretary Stuart Levey as its first CEO, indicating Facebook’s strategy for bridging the nation state-commercial entity divide. Taking a conservative posture to minimize security threat vectors to protect the value of the currency in question appears, on its face, to be the most prudent course of action. On the other hand, taking a more aggressive position that allows for deeper embedding into commerce chains and exposes the currency to more programmability — and consequently creates a greater surface area for malicious attacks — is a risk nation states and businesses will undertake to gain greater participation in the digital economy.
In the short term, then, the conservative posture is prudent. In the long term, however, such conservative viewpoints could result in shifting geopolitical power. The U.S. dollar, for example, has been the de facto foreign exchange clearing mechanism for decades. A conservative posture on the part of the U.S. Federal Reserve on digital currency opens the door for other entrants to displace the U.S. dollar as the international clearing mechanism and, in so doing, removes a valuable foreign policy tool from the U.S. diplomatic toolbox at a time when U.S. diplomacy is already severely challenged.
The fourth annual EY Global Blockchain Summit had a vastly different look and feel as the COVID-19 pandemic shifted the engagement to a virtual forum and turned the spotlight on the rapidly coalescing use cases that blockchain technology underpins. The core coterie of blockchain builders does not have to prove technical value through “use case show and tell” of how the technology works, but rather needs to discuss what the technology delivers in terms of business process improvement. However, technology companies do need to outline product road maps to ameliorate persistent concerns. More important, though, is the need for automated interaction, adjustment and compliance with business rules and the ever-evolving public policies designed to mitigate risk. It appears clear that as revolutionary as blockchain can be to business commerce by shifting the tracking of such activity from general ledgers to distributed ledgers, it can be equally transformative to nation states, depending on what form of currency exchange settles out as the de facto clearing mechanism for multi-enterprise blockchain business networks.