Category Archives: Deloitte

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Is Institutionalization the Missing Driver of Bitcoin’s Fortunes?

A tokenized economy seems a distant concept as the cryptocurrency market flutters again, leaving influencers and experts again insisting that institutionalization may be the key to the market regaining the stability that it so badly needs.

With another 24-hour drop in major cryptocurrency prices, the current cyber-buzz is on Bitcoin Cash’s battle between its forks in Bitcoin ABC and Bitcoin SV, focusing on the potential damage this is causing to market stability, which at best is trying to re-find its feet after months of encouraging performance.

It has been suggested that this hash war is just a sideline to the main causes of instability in the cryptocurrency market, which is the lack of large-scale participation of fintech companies, banks, payment institutions, exchanges, broker-dealers, and other entities in the financial ecosystem.

Last week’s Bitcoin Cash hard forks coincided with Bitcoin, Ripple (XRP) and Ethereum shedding billions of dollars in value and has rebooted arguments among detractors that cryptocurrencies are proving to be an unsuitable store of value and, therefore, not yet equipped for currency status.

KPMG, one of the Big Four auditors, along with Deloitte, Ernst & Young (EY), and PricewaterhouseCoopers (PwC) has a completely alternative spin on this view and sees the lack of large investment across the field as the only missing link. KPMG chief economist Constance Hunter illustrates the problem:

“Consider for a moment extending a person or entity a loan in a cryptocurrency… The value is too unstable at the moment to be assured repayment. Under these conditions, neither lenders nor borrowers would be willing to take the risk of transacting in cryptocurrencies.”

The problem is how to attract the kind of investment needed to kickstart a tokenized economy which is ripe and poised to become the global financial structure of the future. Hunter suggests:

“More participation from the broader financial services ecosystem will help drive trust and scale for the tokenized economy and help the crypto market grow and mature… Crypto products and services are already starting to pivot and the global financial services ecosystem is also beginning to retool itself for the tokenized economy.”

“I didn’t sleep well last night,” Travis Kling, founder of the hedge fund Ikigai commented. “There’s a small chance that it’s difficult to estimate, that something really bad could happen related to Bitcoin Cash that could then impact the entire crypto market.”

Such splits are clearly deterring Hunter’s big players from the market, argues Financial Times journalist Jemima Kelly in her story, Bitcoin’s repeated splits undermine its long-term value, who suggests, regarding the Bitcoin Cash fork, that “anyone trying to market such a thing — however many new bells and whistles they put on it — is essentially trying to sell hot air”.

KPMG maintains that somehow the market needs to regain its confidence and that the next step is around the corner, insisting, “Cryptoassets have potential. But for them to realize this potential, institutionalization is needed.”

Clearly, reinventing Bitcoin isn’t helping.

 

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Deloitte: 5 Hurdles for Blockchain to Enter Mainstream

Blockchain adoption barriers can be lowered significantly if five “key issues” can be addressed, according to an article published by Deloitte.

Barriers

Published on 28 September, the article titled “Blockchain and the five vectors of progress” takes a deep dive into the many issues that are stifling mass adoption of the technology. In order for progress to be made, the article recommends three areas that will “enhance technical feasibility” and two others which call for greater regulatory support and an increase of organizations formed by blockchain enterprises.

Other reports and studies from the global auditing and consulting firm have appeared rather bullish on blockchain, suggesting that businesses that do not adopt and implement the technology will be at risk of falling behind.

Furthermore, a survey that was recently conducted by Deloitte highlighted positive sentiments held by industries across the globe; it found that a vast majority of participants believed that mainstream adoption will come to fruition in the not-so-distant future.

The article somewhat counters these findings by referencing a 2018 Gartner CIO survey which found that 1% of respondent CIOs had managed to “indicate any kind of blockchain adoption”, with another 8% working on either a pilot or were in short-term planning phases.

Speed

It goes on to argue that blockchain-based systems as a transaction medium are still too slow with the number one network, Bitcoin, only able to manage up to seven transactions per second and the second largest, Ethereum, around 15.

However, massive improvements have been made, with IBM managing to run 3,500 transactions per second on the Hyperledger Fabric blockchain platform. Furthermore, the article highlights the push to evolve consensus mechanisms as a sign of distinct progress.

Standards

Next up is standardization; for any business without blockchain coders and developers on staff, adopting the technology is expensive and time-consuming. This is due to the overflowing number of blockchain projects that are utilizing multiple coding languages, mechanisms and protocols.

Should there be a standard in place, the field will somewhat be leveled and an increase in industry-level participants will be further made possible. The report makes note of the Enterprise Ethereum Alliance (EEA), who are currently working to create a standard Ethereum network software for business.

As the number of participants in the blockchain race grows, it is thought that standardization will prove valuable to collaborations, sharing of blockchain solutions, smoother integration with existing blockchains and cross-blockchain transactions among many others.

Low-cost ease of access

Blockchain solutions are complex and costly, not only to create but also to implement.

Naturally, unintuitive new technologies can ward off even the most open-minded of skeptics, though this is also changing rapidly in the face of industrial giants such as Amazon and IBM launching affordable cloud-based technology as-a-service solutions.

These new services enable companies to dramatically reduce the barriers with blockchain templates, which allow for the simple setup of a “basic blockchain infrastructure”. Ease of development is also on the list of issues presently being conquered with new tools being created by companies such as Google.

Legally sound

Regulation has been one of the hottest topics surrounding the nascent technology in 2018. Countries such as Malta, South Korea, and Switzerland are tipped as the jurisdictions that are leading the regulatory race, with Malta miles ahead of the closest competitor.

Deloitte agrees that regulation is absolutely vital to the future success of blockchain, creating appropriate classifications for cryptocurrencies, defining smart contracts as well as Anti-Money Laundering (AML) and Know-Your-Customer (KYC) policies being high on the order list.

The formation of “blockchain consortia” is the final vector listed as part of the Deloitte’s five critical issue areas; groups of collaborating companies who band together to promote the advancement of the technology can be a powerful catalyst for its adoption.

Like the EEA, they can establish new standards for the tech, lobby governments, develop infrastructure, educate, advise and do much more to speed up progressions with the aforementioned vectors listed.

Conclusively, the article writes:

“It’’s understandable why, despite promising pilots and experiments, executives might wonder when — and even whether — blockchain will be ready for mass adoption. But progress along these vectors is bringing the technology closer to its breakout moment every day.”

 

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Deloitte: 84% of Businesses Say Blockchain Mainstream a ”Matter of Time”

Multinational professional services network Deloitte has published results of its 2018 Global Blockchain Survey, with significant findings including that 84% of businesses believe blockchain mainstream adoption is just a matter of time, with the biggest issue to this identified as regulatory concerns.

A total of 1,053 companies took part in the survey across seven countries: Canada, the US, Mexico, France, the UK, Germany and China. Respondents came from ten different industries, with the majority part of financial services, technology/media/telecommunications, and consumer products and manufacturing. Nearly all of the respondents held C-level or equivalent positions, with the largest functional area represented being from information technology.

Key Deloitte findings

  • 84% of businesses responded that they believe it was only a matter of time before blockchain ”achieves mainstream adoption”.
  • The most significant advantage of blockchain over existing systems in the respondents’ industries was voted as the potential for greater speed compared to that currently in use, at 32%; just 2% said they did not see any advantage of blockchain over their established systems.
  • 84% agreed that blockchain-based solutions brought higher levels of security than conventional information technologies.
  • When questioned on the greatest barriers for implementing blockchain technology, 39% cited regulatory issues, 28 % a lack of in-house skills or understanding, and 6% said there were no barriers.
  • The most dominant stakeholders enquiring about blockchain strategies were suppliers with 54% of the businesses experienced this, followed by market analysts at 48%; only 7% had received no such queries.
  • Supply chain blockchain solutions were the most popular response for current use cases the companies were working on at 53%, Internet of Things came second with 51%, and digital identity at 50%; of the businesses surveyed, 4% were not working on any.

The US is falling behind

When it comes to blockchain, the Deloitte survey indicates that the US is not number one. In fact, of the US companies that participated, blockchain had been deployed in production at a much lower rate than those from other countries; 14% of US respondents have begun internal blockchain productions compared to 50% in China and Mexico. It also fell behind other countries when it came to hiring new employees with blockchain experience with just 24% of countries doing so. China was the highest performing in this category with a staggering 86% investing in industry-skilled workers.

Canada is getting it right

In contrast to its neighboring country, Deloitte found a ”vibrant and growing community of blockchain enthusiasts and entrepreneurs” in Canada, putting it at the forefront of both blockchain and cryptocurrency innovations. There is apparently no signs of innovation slowing down in the country, not since Ethereum, in fact, the analysis states.

Part of this success can be attributed to a consistently evolving role of regulations that tend to keep up with changes that blockchain brings, something the US has been struggling with. Despite regulatory concerns being the top issue for the majority in regards to adoption, two-thirds of Canadian respondents do not believe this will be a barrier in their country.

Financial services face pivotal issues, lead progression

The financial services sector may have been the first to explore and globally recognize the potentials of blockchain but its investment is being outperformed by the automotive, life sciences, oil and gas, and tech, media, and telecom sectors. Several significant issues were cited by the participating financial service companies including scalability and security.

As organizations look to explore the extensive number of blockchain solutions within reach, scalability must be addressed. As referenced above, 84% of surveyed companies said they believed blockchain powered systems were more secure, although security is still a major topic discussed by financial services as the ”new threat matrix” is still emerging.

Interestingly, over half of respondents from the oil, gas and automotive industries said that they viewed blockchain uses primarily as ”a database for money or an application for the financial services industry”,’ in conflict with the significantly high number of executives from those industries that claimed to have ”excellent- to expert-level” blockchain understanding. Those from the life sciences and financial services sector voted in far greater numbers that the use cases for blockchain expand far past just financial service provision.

Executives from the financial sector have indeed been leading the way in reexamining areas where the technology can be used to improve the processes and functions of operations that have been static long-term, unsurprisingly ahead of their colleagues in other sectors in terms of development.

”Closer to its breakout moment every day”

The Deloitte survey concludes that academic hypothesis from five years ago is gradually coming into fruition; developers are moving past stages of learning and exploring its potential, to identifying and creating business directed applications. ”[Blockchain] is getting closer to its breakout moment every day”, analysis from the survey reads, pointing to the participating executives’ responses that they plan to make major moves in the field over the following several years.

It continues to suggest a practical future for the technology: ”Instead of concentrating on how to use blockchain to support a specific product or idea, the time has come to focus on evolving blockchain itself… we’re seeing the most dramatic progress being made by those organizations that have willfully jumped into the deep end of the pool.”

 

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PwC: 84% of Companies Active in Blockchain but More Trust Needed

A new report out by PricewaterhouseCoopers (PwC) illustrates the degree to which companies are now seeing blockchain as an essential business tool.

The report shows that out of companies surveyed, 84% were actively involved in blockchain technology in some way. The PwC 2018 Global Blockchain Survey included 600 company executives for 15 different regions.

Everyone is talking about blockchain, and no one wants to be left behind,” reported PwC, adding, “In reality, companies confront trust issues at nearly every turn… As with any emerging technology, challenges and doubts exist around blockchain’s reliability, speed, security and scalability.”

Some 45% of executives said that trust was the only issue that might prevent it moving forward, along with regulatory uncertainty, and compliance and intellectual property concerns. Other research from Cowan suggests that it make take up to six years for acceptance and widespread adoption.

Bloomberg read the PwC figures from a completely different perspective, suggesting that “most companies aren’t diving into blockchain”, pointing out that out of the 600 companies surveyed, “only 15% of them have a live project and only 10% are piloting blockchain’s use”.

Bloomberg suggests that the reason that many companies haven’t leapt in wholeheartedly and adopted blockchain is down to the cost of replacing current systems. Plus companies need to be convinced that there are significant advantages over their existing systems which at this stage is difficult to prove. Graine Mcnamara of PwC explained:

“It’s a little bit stunning how stagnant it is. A lot of people took a few steps and are pausing before the bridge. They might be having a hard time articulating the ROI.”

What must be a considerable selling point to companies is the fact that major players such as Microsoft, Amazon, IBM, Deloitte, JPMorgan and HSBC all have blockchain initiatives either in progress or planned for the future. It is likely that as these initiatives prove their worth the industry will take a more active interest. The interest shown by Facebook this year is likely to add to this impetus.

 

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Nasdaq Links With Singapore Stock Market in DvP Project

The Monetary Authority of Singapore (MAS) and the Singapore Stock Exchange (SGX) have announced a collaboration with Nasdaq as a key partner.

MAS, which functions as Singapore’s central bank has partnered with Nasdaq, Deloitte, and Anquan to develop the technology to impart “Delivery versus Payment” (DvP) capabilities for tokenized asset settlement. According to MAS this will allow for;

“…simultaneous exchange and final settlement of tokenised digital currencies and securities assets, improving operational efficiency and reducing settlement risks.”

Further, the project will examine the viability of utilizing smart contracts to automate DvP settlements and report back by this November. The partners plan to use the open source developed solution as a part of phase 2 of Project UBin, a project which began in 2016 with the development of a simple prototype on Ethereum in Phase 1.

The second phase of Ubin (“Re-imagining Interbank Real-Time Gross Settlement System Using Distributed Ledger Technologies) aimed at finding solutions “around the need for transactional privacy and deterministic finality”, and “the ability to perform multilateral netting capabilities in a decentralised manner while preserving transactional privacy.”

MAS Chief FinTech Officer Sopnendu Mohanty commented about the project and how blockchain tech is impacting financial transactions and injecting new energy into business:

“The involvement of three prominent technology partners highlights the commercial interest in making this a reality. We expect to see further growth in this space as FinTechs leverage on the strong pool of talent and expertise in Singapore to develop innovative blockchain applications and benefit from the new opportunities created.”

Ho Kok Yong, Financial Services Industry Leader at Deloitte Southeast Asia shared Mohanty’s optimism regarding the direction of Ubin’s latest phase:

“Using two different open source blockchain technologies to implement and design the Distributed Ledger Technologies (DLT) prototype, we are able to mitigate counterparty risks in DvP (Delivery versus Payment) and achieve DvP settlement finality with clearing members.”

Magnus Haglind, Senior Vice President and Head of Product Management (Market Technology) at Nasdaq views such eclectic collaborations as the key to the success in embarking on such projects in the future:

“In our experience of developing projects to leverage blockchain to improve market and operational efficiencies, the willingness to collaborate by cross-industry parties was – and is – the most essential component for success.”

Nasdaq, the second-largest stock exchange in the world, has suggested that it could foresee opening its own cryptocurrency exchange in the future and has already developed a distributed ledger blockchain system that optimizes the use of securities as collateral for margin calls.

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Ireland Lines Up to Become “Global Blockchain Center of Excellence” with New Initiative

IDA Ireland has announced that it wants to promote the Irish Republic as an ideal location for international businesses focused on blockchain, according to The Irish Times.

The state body is the agency responsible for the attraction and development of foreign direct investment in Ireland. Its new initiative, established by the Irish Blockchain Expert Group, an IDA Ireland-led forum, has been set up to involve companies working with blockchain technology towards promotion of the republic as a space for business for overseas companies.

Ireland currently has a forward-thinking approach to blockchain technology. Recently National University of Ireland (NUI) authors of a study on the adoption of blockchain approached the government to promote a more widespread use of the technology in the country.

One of the findings of that study showed that only 40% of companies in Ireland had embraced blockchain technology, which the researchers felt was relatively low, despite Ireland’s 13th position on Bloomberg’s 2018 Innovation Index, with high productivity scores and advanced IT infrastructure.

The latest initiative started by the Irish Blockchain Expert Group is also backed by the department of finance, Enterprise Ireland and Consensys, a company established by Joe Lubin, one of the co-founders of Ethereum.

Consensys has said that it plans to open a new Dublin-based innovation studio that is to include a development lab where engineers will build and deliver Ethereum-based blockchain platforms and products.

IDA’s chief information officer said of the new project:

“We regard blockchain as an area with huge potential and we are seeing great interest among IDA Ireland’s client base. This initiative will enhance the blockchain industry in Ireland and our position as a global blockchain centre of excellence.”

Irish based startups, AidTech and Arc-Net, have recently developed solutions built on blockchain technology and Deloitte has a dedicated blockchain laboratory in Dublin. Enterprise Ireland has also announced a new EUR 750,000 competitive start fund for companies working in blockchain and related technologies in the republic.

 

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