Apparently, Wall Street’s Excitement about Blockchain Technology is Fading, Calls DLT a Shiny Mirage
As much as there’s some excitement in some quarters regarding the use and application for blockchain technology, the full shift to the use of this technology will not be rapid and would still take quite a while. It would seem that most of the major companies who have considered and even begun testing various blockchain solutions are still quite stuck for some reason or another.
For example, Nasdaq Inc. and Citigroup Inc. in 2017, declared a collaboration that will see both entities using a new blockchain platform to improve their services, making private security payments a lot more efficient. At the time, it was described as “a milestone in the global financial sector” by Adena Friedman, the President, and CEO of NASDAQ. Two years later, both firms have yet to deploy or move forward even after a successful pilot.
According to an unnamed source, the fact that the project began with some success didn’t mean much because the costs of going forward with the project significantly dwarfed the benefits.
Today, Facebook has now joined dozens of very large organizations and conglomerates including tech companies and financial institutions like banks, who are investing billions of dollars to study, create and implement blockchain solutions to their businesses. But regardless of this, adoption is still very slow.
A recent study of about 33 different blockchain-related projects embarked on over the last four years by giant firms has shown disappointing results. It would seem that at least twelve of these projects cannot move forward and are stagnated in the testing stage. Most of the others who have moved past testing are still struggling with deployment and adoption.
Hyder Jaffrey, Head of Strategic Investments at UBS AG Investment bank has weighed in on the issue saying any measurable progress will take a lot of time. According to Jaffrey,
“This is a transformation of the market. It isn’t a big bang.”
Jaffrey also suggested that it might take up to seven additional years before any real breakthrough regarding adoption is achieved.
This is despite the fact that the investment bank has announced a digital asset known as the Utility Settlement Coin after working on this for more than five years. The cryptocurrency is still being developed by Fnality International and is expected to be fully deployed by 2020. Regardless, Rhomaios Ram, the CEO of Fnality, has said that the only way it can have any measurable effect is if other markets are willing to use blockchain. This, however, could take quite a bit of time.
Another significant factor affecting the adoption of blockchain technology is the various regulatory shots fired at the sector. Since Facebook’s announcement of the Libra, the social media giant has received a lot of flak from regulators and the governments with some stating categorically that the project should be halted.
Now, it would seem that all the excitement the blockchain sector initially witnessed especially regarding adoption with traditional institutions might be waning and slowly being replaced by practicality.
John Whelan, the Head of Digital Investment Banking at Banco Santander, has stated that blockchain technology needs to have a few things in its focus if it hopes to blossom. Whelan said these three things are technology, demand, and compliance. He said this while looking in retrospect. According to him:
“Those of us who were involved in blockchain early on maybe did not appreciate the extent to which the three parts have to move together.”