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The Weekend Read: Sep 20

1. R3 Announcement

It has been a busy week for us at R3. Our announcement in the FT sparked quite a bit of coverage (click here for a selection of articles). We look forward to making more announcements in the coming weeks.

2. Blockchain for Business

IBM hit the news this week with a WSJ article extrapolated from this blog post by Arvind Krishna, SVP and Director, IBM Research:

We believe that for blockchain to fulfill its full potential, it must based on open technology standards to assure the compatibility and interoperability of systems. Furthermore, the various blockchain versions should be built using open source software rather than proprietary software, which could be used to suppress competition. Only with openness will blockchain be widely adopted and will innovation flourish.

Jamie Dimon was specifically asked about "block chain money transfer" at a conference this week (overview here). Dimon reiterated his lack of optimism on Bitcoin itself while making some encouraging comments about blockchain tech (quote edited for clarity, please see full transcript here):

I still believe [Bitcoin] will not be a currency because government’s control currencies and they are not going to like it...but the block chain, which is a technology behind the encryption and the certification...might very well be very useful in a cheap way if you can go see we own something...it takes 21 days on average...to transfer a loan...So if you go to DTCC, they already keep all the data. They transfer all these things, the question is can you use these things to do it more efficiently. And if it is more efficient we should do it. And I don’t know yet and it’s got to be secure.

3. Bitcoin as Commodity (says CFTC)

The CFTC finally gave a clear opinion on Bitcoin, deeming it a commodity (I agree), which not coincidentally puts it directly under the purview of the CFTC. It will be interesting to see if other regulatory bodies such as the SEC start to stake out jurisdictional territory in response.

4. Fintech Conference Season

Fire up the name tags and cocktail banter...conference season is well under way. NYC played host to Finovate (rundown here), while London hosted Fintech Week. Our own Richard Brown took part in a spirited panel entitled Blockchain for Enterprise (video here, but beware the sound mix) along with Jon Matonis and Dr. Lee Braine (IB CTO Office from R3 partner bank Barclays).

5. Odds 'n Ends

I admit, I cannot help myself when presented with Tech Bubble click bait. In that spirit, here are two stories I have enjoyed recently. First, Bubble-Grim-Reaper Bill Gurley calls out a few Unicorns as potential Undercorns during a Techcrunch chat:

“It’s like the old adage, [when you’re] handing out dollars for 85 cents, you can go [infinitely],” he said. “Chosen unicorns are being given hundreds of millions of dollars, but you have to ask how much margin is there. The unit economics [with Instacart] would be very difficult, I’d think.”

Couple this with the recent Vanity Fair article by Nick Bilton:

Now countless people from all over want this to be a bubble and they want it to burst. There are the taxi drivers who have lost their jobs to Uber; hotel owners who have seen their rooms sit vacant as people sleep in Airbnbs; newspapers that are at the mercy of Facebook’s algorithms; booksellers and retailers who have been in an unrelenting war with Amazon; the elderly, who can’t keep up; the music industry; television producers; and, perhaps most of all, San Franciscans, who would rejoice in the streets if their rents fell from totally insane to merely overpriced, or if they could get into a decent restaurant on a Monday night. The bloggers who cover the technology industry would write a thousand jubilant think pieces saying “I told you so” to the venture capitalists who sneer and scoff when anyone comes close to mentioning the word “bubble.” As one prominent tech reporter told me, “Frankly, wiping that smug look off Marc Andreessen’s face—I can’t wait for that.”

Finally, this fascinating (long) Bloomberg piece on Tom Hayes, one of the chief conspirators (or fall guy, depending on your perspective) in the LIBOR manipulation case is worth a read:

The investigations into Libor kick-started by McGonagle and his colleagues at the CFTC have resulted in close to a dozen firms being fined a combined $10 billion. More than 100 traders and brokers have been dismissed or have left the industry. For those who remain in banking, the trading floor in the post-Hayes era looks like a very different, more chastened place. Emboldened by their success on Libor, regulators have successfully settled manipulation probes in foreign exchange, precious metals, and derivatives markets. Banks have built up their compliance staffs. Gone are the firm-funded trips to Val d’Isère and the $1,000 meals at Le Gavroche. Traders today describe living in a state of paranoia that their past conversations will be raked over and used against them. The draining of excess from banking in recent years is commonly attributed to the financial crisis. But as the public well knows, nobody who ranked on Wall Street went to jail over subprime mortgages. With Hayes behind bars, and others set to follow him to the dock, Libor and the related collusion cases have an equal if not greater claim to the new, subdued reality.