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Shaping the future of finance

Bankers see faster horses; technologists imagine cars

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I was chairing a conference on blockchain and distributed ledgers the other day. The audience were a mixture of start-ups and banks, and the speakers were talking about how they viewed the world of distributed ledger developments.

Many of the banks had successfully complete proofs of concept projects and were now moving to pilots. It was interesting to hear them talking, and specifically interesting to hear that they did not see blockchain in live production environments for many years to come. In fact, when pressed to talk about whether SWIFT might be replaced by a shared ledger or Target2 for Securities (T2S) would move to decentralised structures, the answer was not for the foreseeable. In fact, it seemed to be that most of the participants expected it to take at least ten or maybe twenty years before blockchain would move to mainstream in financial market structures. Wow, that’s a long time.

The start-ups were far more bullish about things, but then they would be as blockchain is their business. They talked about how shared ledgers were moving at a pace in contracts, and how they could reinvent old processes using digital provenance. It was refreshing to hear and yes, there are some countries and companies who are truly visionary like Tezos and Bancor, Everledger and Abra.

What struck me as the day went along is that it really does feel like banks are grappling with faster horses whilst the start-ups are trying to create cars. Banks are trying to retrofit this shiny new technology of shared ledgers to their existing trade structures and processes. That is why distributed ledger has been talked about mostly in the context of clearing and settlement, trade finance and the supply chain and payments in banking. But that’s just trying to create new and more efficient trade structures, rather than stepping back to basics and asking: is there a better way of doing this thing?

This discussion coincided with the furore created by Jamie Dimon, when he claimed that bitcoin was a fraud this week. His exact words:

“The currency isn’t going to work. You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart. If you were in Venezuela or Ecuador or North Korea or a bunch of parts like that, or if you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than US dollars. So there may be a market for that, but it would be a limited market.”

He went on to say that if any JPMorgan traders were trading the crypto-currency, “I would fire them in a second, for two reasons: It is against our rules and they are stupid, and both are dangerous.”

He said quite a bit more than this, including the scheme being a fraud that would lose people all their money.

I was then quoted as saying he was naïve, which I think he is. The fact is that the financial system that Jamie Dimon and JPMorgan operate within, is a narrow system created for the industrial revolution. It is quite clear that in this digital revolution, there will be a new form of trade. That new form of trade demands a digital currency, and the leading digital cryptocurrency today is bitcoin.

On the one hand, I might agree with Jamie Dimon that bitcoin could crash and burn; on the other, I think that dismissing bitcoin as purely for criminals is stupid, as it clearly is not.

bitcoins are not anonymous, they’re traceable. They can be used to buy and sell things as a currency, but they are also a commodity, an asset and a security. The currency represents all these things today. In ten years, there will be a global digital currency, and governments will try to tie that currency to their domestic fiat currencies, to ensure that tax and traceability still work. That is their challenge, although I found it interesting when asking one of the regulatory experts how they would regulate money that does not recognise national boundaries, and their answer was we won’t. They won’t because they can’t.

I think this whole debate illustrates well the counter-culture clash of fintech today. The fin are trying to fit the tech to their views of the world. That is why they are trying to retrofit blockchain to existing financial structures and decrying bitcoin as a currency for criminals. The tech are grasping the opportunity to reimagine the world and create wholly new structures that work for a globalised, digital marketplace. The fin can only imagine faster horses whilst the tech are creating cars.

The best way to summarise the whole discussion was posted by Brock Pierce, Chair of the Bitcoin Foundation, who shared this on social media.

JPMorgan CEO Jamie Dimon says bitcoin is a 'fraud' that will eventually blow up

In other news the US Postal Inspector General warned citizens not to use email. "Any american would be a fool to trust important correspondence to electronic mail. The very nature of so called 'e-mail' means it could be fraud! It's impermanent. No one should use it"

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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