The Weekend Read: Jan 24

Greetings from London, your author's last stop on a three city tour. Many thanks to those in Sydney and Singapore for their hospitality. Now for the jet lagged links.

Test driving the latest VR goggles / Tim Swanson gets his fortune told

1. RegTech

RegTech is a theme that is picking up some momentum. The UK Government Office for Science released a very well done report (which includes a chapter from our CTO Richard Brown and FoTWR Simon Taylor) on the potential for distributed ledger technology in both the public and private sphere:

In summary, distributed ledger technology provides the framework for government to reduce fraud, corruption, error and the cost of paper-intensive processes. It has the potential to redefine the relationship between government and the citizen in terms of data sharing, transparency and trust. It has similar possibilities for the private sector.

For those looking for a summary of the lengthy paper, this BBC article does a very good job.

The FCA's Makoto Seta further highlighted the interest in RegTech at a recent conference, noting that "the FCA was interested in how blockchain technology could reduce the burden of regulations." Which is a key point, as the use of smart contracts could allow for the implementation of regulations at code level instead of via post-hoc enforcement.

The People's Bank of China (PBOC) issued a very positive statement on digital currency, with a report recommending to "set up a clearer strategic target for launching digital currencies, overcome the key technological barriers ... and aim for an early launch of the central bank's digital currencies."

Pascal Bouvier extends this thought experiment, taking as a given the eventual adoption of what he calls "fiatcoin" and running thru some of the implications:

Until fiatcoin would be made available to the public - and I am also convinced this will happen sooner than we think - how would financial institutions intermediate between fiatcoin and physical currencies (physical or digital cash)? I realize all these questions lead us to rethink what a bank will do in the future and how it will compete. Deposit gathering and credit intermediation may not be the end goal anymore.

2. Distributed Ledger Headlines

Congrats to the Digital Asset team on their announcement this week of a $50m funding round, which includes an extended PoC with the Australian Stock Exchange (ASX) on a distributed ledger based post-trade solution.

Another congrats to UBS and Alex Batlin for their decision to donate their "smart bond" code to an organization working on HIV research: "Finclusion, a London-based fintech firm, has developed a blockchain platform for HEAL Alliance, a non-profit organisation looking into a cure for HIV that wants to issue social impact bonds."

And a final high five to the mad Lab scientists at R3 on the announcement of the first of many collaborative experiments across the R3 member banks. In the words of Tim Grant, "Rather than just talking about what we might do, we've moved into a new phase, which is actually executing these plans and demonstrating how this technology might work in practice."

3. Blockchain Hype

Davos fired up the blockchain hype machine, welcoming not only the usual bloviators and bureaucrats but also evidently Satoshi himself. Fintech and blockchain were on everyone's panel talking points, reports the FT. (For a snarkier blog version of the above article from Izabella Kaminska, click here). MasterCard's head of innovation Garry Lyons also expressed his company's strong interest in the tech in this article, which allows me to repost this gratuitous R3 shout out:

So what does Mastercard think about the consortium? “In order for blockchain technology to move to a wider scale, it needs regulation and investment,” says Lyons. “R3 is an interesting way of doing that because it brings several interested parties together to experiment with underlying tech. It’s a good opportunity for the banks and there’s more chance of blockchain technology succeeding as a group than disparate parties.”

A recent Goldman Sachs podcast with co-head of technology Don Duet offers a nice antidote to the hype, while still striking a positive chord:

I think that, you know, you could ask the question of, well, why couldn't this have been designed before? And I think that that’s a very valid question. I think part of what we find, or I certainly find personally very exciting about this is just the awareness. I think the awareness that’s happened within the financial community that there is a technological answer that can help drive change and improve our system is just very encouraging.

And finally...

One last posting on the bitcoin news cycle from last week. Eris Industries' Casey Kuhlman does a great job of framing the arguments on both sides. I plan on pointing folks to his post when they ask me on this topic in the future with a short addendum of "What he said"

The central point of this piece is basically to say this. Calm down bitcoin. It’s gonna be alright. No single banker I’ve met, and I’ve met and work with plenty, has ever said to me that they were in competition with bitcoin. Indeed, most find this idea laughable.
They have much bigger, more immediate problems to solve. Problems which the raw blockchain and smart contract technology is better suited to help them with than any one application built on the technological core.