Some believe the blockchain technology that underpins digital Bitcoin currency is the future of financial transactions. If so, it could upend status-quo operations throughout the global industry by making money transfers cheaper and more secure. But according to the European Union’s markets regulator, it is still too early to tell just how much disruption to expect from blockchain.
While the European Securities and Markets Authority (ESMA) punted on making any actual predictions until it can complete a deeper analysis, the watchdog did offer some skepticism towards the hype surrounding blockchain, the common name for what is formally called distributed ledger technology (DLT).
“ESMA believes that the DLT will need to overcome a number of possible challenges and shortcomings before its benefits can be reaped,” wrote the agency in a statement.
EMSA added that it also sees “a number of legal and technical challenges that would need to be overcome before DLT could be applied widely to securities markets.”
One person who fully believes in the technology is Don Tapscott, author of the acclaimed, best-selling 2006 business book Wikinomics: How Mass Collaboration Changes Everything. In a recent commentary published on LinkedIn, he pulled no punches in describing how blockchain is poised revolutionize the “shoddy” state of the global financial system.
“It is antiquated, a kludge of industrial technologies and paper-based processes dressed up in a digital wrapper,” wrote Tapscott. “It is centralized, vulnerable to data breaches, systems failure, and terrorist attack. It is exclusive, denying billions of people access to basic financial tools. It is opaque, baffling monetary policy makers and financial regulators, thanks to the compartmentalization of oversight. And it is monopolistic, lobbying for the status quo and stifling disruptive innovation.”
Tappscott notes that, in addition to improving the efficiency and security of financial transactions, blockchain could lower the world’s reliance on credit rating agencies and improve transparency in sectors like auditing and insurance. It can reduce costs for banks, enhance productivity, streamline risk management, and expand upon product and service offerings.
While he doesn’t see the technology as “an existential threat” for companies that embrace it now, blockchain will create winners and losers. And the longer a firm waits, the more it risks becoming a dinosaur as more agile, forward-thinking firms jump to the vanguard.
From his view, there is no need to study the topic longer. The future is inevitable — and this major disruptor will be a big part of it. “The unstoppable force of blockchain technology is barreling down on the immovable infrastructure of modern finance,” writes Tapscott.