“There’s a gap between crypto’s promises and progress.”
“[trying to regulate crypto is] like trying to repair an airplane while it’s flying in the air.”
“Money functions better when everyone is using the same thing”
“Billions of dollars have been earmarked for blockchain and crypto that has to be invested.”
These are just a few things I heard the speakers say on Day 1 of the Philadelphia Federal Reserve Bank’s sixth annual Fintech Conference on August 3, 2022.
The event’s agenda was full of blockchain and digital asset-heavy sessions, and each panel featured renowned speakers from the world of banking, finance, regulation, blockchain, and digital assets.
What industry insiders think
The speaker lineup was banking and regulator heavy, and their insights were refreshing to someone like me who has primarily attended blockchain and digital asset-focused events—where everyone is beating the drum in favor of these emerging markets—for the last five years.
Stablecoins, distributed ledger technology (DLT), central bank digital currency (CBDC), DeFi, NFTs, and the metaverse were the main topics of discussion throughout the day, many bankers and regulators have a much different view on these concepts than blockchain and digital currency enthusiasts, and several had data to back up their opinions.
The good news is: Many speakers believe that distributed ledger technologies have the most value when they come in the form of a computing platform with its own programming language, which paves the way for programmable money and other aspects of finance. They were not very keen on BTC and other cryptocurrencies that don’t have business use-cases, economic value, or value for enterprises and consumers beyond speculation.
Others found value in distributed ledger technology being used as infrastructure to create digital identity solutions, enhanced currency rails, systems with increased transparency, and systems with modified intermediaries that make transactions more efficient or cost-effective.
However, the individuals with these views were primarily representatives from the blockchain and digital asset industry, such as Paul Grewal, the Chief Legal Officer at Coinbase (NASDAQ: COIN); Dante Disparte, the chief strategy officer at Circle; and nearly every panelist featured on the final panel of the day, “The Future of Fintech: DeFi, NFT, Smart Contracts, Metaverse, Web 3.0?”
The group with the most conviction was highly skeptical of blockchain technologies and digital assets and the alleged value they could introduce to the world. This group was made up of individuals that worked at government agencies and in the banking industry.
They were doubtful that DeFi would pick up significant traction because DeFi apps and services don’t require you to know who the counter-party is in a transaction and, therefore, aren’t protected in courts or given the other protections in the legal system that most financial products receive. Due to the unfavorable circumstances mentioned, this significantly limits the type of contracts most people would want to enter in the DeFi world.
The skeptics claimed that most banks have the green light to issue stablecoins, but that no bank has done this yet because consumers do not have a demand for them and that most digital currencies are a poor means of exchange, adding that they won’t be used in real commerce. Others expressed that digital assets aren’t really decentralized because a few big players hold the lion’s share of coins/tokens and many protocols have a development team, which means there is a central point of failure in the system.
In other words, the speakers that made the strongest arguments felt that digital assets had more drawbacks than advantages which have prevented and will continue to prevent institutions, accredited investors, and other serious banks and financiers from getting involved in the space in a significant capacity.
Yet, the room was packed due to its blockchain and digital currency heavy line-up of topics and speakers. The audience was eager to hear about distributed ledger technologies and digital assets, and the two sessions that did not focus on blockchain/Bitcoin topics had the least members in the audience.
But everyone came for ‘crypto’…
Overall, it was clear that the speakers from the banking, finance and regulatory world did not see digital assets as a threat. One speaker on the regulator’s panel said that his office doesn’t see large-scale adoption of digital currency products and services by families in America and that most of the digital currency ecosystem today is related to speculation.
“Different committees are working on different approaches, they are all taking it seriously, but I can’t say when congress will respond and how it will work,” said Nellie Liang, the Under Secretary for Domestic Finance at the U.S. Treasury Department.
The regulators signaled that they are prepared to enforce laws on blockchain businesses and know that fraud, theft, market manipulation, and conflict of interest that harm users run rampant in digital currency. They also made it clear that they are focused on putting protections in place for consumers to resolve those issues but expressed that digital currency would need to become a primary payment method or see significant adoption and use in the world for crackdowns to proliferate.
After the regulator’s panel, the crowd started filing into the Philadelphia Federal Reserve Bank lobby to drink coffee and network with the others in attendance.
“This next topic isn’t about crypto, but you should stick around to watch it,” said Karen Webster, the CEO of PYMENTS.com, who was the moderator for one of the two non-digital currency sessions of the day.
“It’s time to talk about the other 99.7% of payments, [cash, credit, and debit card transactions],” said the panelist, Renaud Laplanche, the founder of Upgrade, a buy-now-pay-later service, while people headed for the door.
What Laplanche said made me laugh. He’s right. Blockchain and digital asset transactions are such a small, insignificant part of the transactions that take place in the global economy.
I stuck around to watch his session, and so did others. I think people found it interesting, but not nearly as interesting as the blockchain and digital currency topics being discussed. I draw this conclusion from the number of people in the audience who stuck around to watch the session and the number of questions audience members had during the Q&A portion.
The blockchain and digital asset world are small. If we were to take a snapshot of the global economies, commerce, banking, and finance systems, we would find that digital assets account for such a small portion of the data that they would not be worth talking about.
Regardless, distributed ledger technologies and everything that comes with them has captivated global market participants—not the global market decision makers.
There is clearly gravity in blockchain-based ideas, a force that draws people in and makes them want to learn more even when authoritative figures dismiss the topic. There is objective value within blockchain technologies that haven’t been unlocked yet. Blockchain creates new opportunities and business models, but everyone building with blockchain insists on creating a blockchain-based version of something that already exists—until this cycle is broken, the authoritative figures will continue to be skeptical of what the technology can do for the world.
However, the fact that people are packing out the Federal Reserve Bank auditorium hall because they believe they need to know about distributed ledger technologies and be prepared for a future where they are abundant means that there are individuals and businesses building solutions on-chain that will one day revolutionize enterprise and consumer markets.
Watch: The BSV Global Blockchain Convention presentation, Making Blockchain Easy for Real World Use
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