Comparing Blockchain’s Revolution to the Forex Market: DLT Still Needs Time to Mature and Grow
The word ‘blockchain’ has seemingly entered the mainstream in recent months, with everyone now talking about the miraculous capabilities of this technology. As a result of this, a host of companies and startups are now trying to attach this word to all of their products in an effort to make them seem more appealing and worthwhile.
However, according to official statistical data released at the recent Blockchain Summit held in Israel, it was found that nearly 90% of all the world’s blockchain startups have already failed. This calls into question some of the high claims that have been made in the name of Blockchain and whether the technology really warrants the amount of attention it is currently receiving.
In this article, we will look at the use of Blockchain within the foreign exchange (FX) market and why the technology has not been able to take off within this niche’ segment. However, before we start, we need to look at some of the established companies that have already made use of blockchain within their native service platforms.
First off we have Santander, a Spanish banking institution that was one of the first companies to release a blockchain enabled payment system called ‘One Pay FX’ for commercial use. The service allows customers to make cross-border payments almost instantly through the use of a simple mobile application.
Then we have Cobalt, a transaction platform that has been exclusively designed to target institutional clients. A point worth mentioning here is that, Cobalt makes use of a single, shared view transaction module which effectively allows the firm to cut its post trade costs by a whopping 80%.
Last, but not least, we have CLS, a settlement service provider that has partnered with a host of companies like IBM to develop specific payment netting services for them.
So How Did All Of These Platforms Perform?
Since all three of the aforementioned blockchain-based payment platforms are fairly new within the FX market, it is difficult to gauge their success accurately. For example, even though the One Pay FX app has over a million downloads on the Google Play Store, it is not possible to know how many customers actually make use of the app on a regular basis.
In the case of Cobalt, the company’s CEO, Adrian Patten, noted that his firm was currently in the process of onboarding some big names institutional players in the coming few months. He also added, that Cobalt has received a number of commitments from firms that are looking to adopt Cobalt’s blockchain platform as soon as the service goes live globally.
On this subject, Patten added:
“We developed our technology in conjunction with the FX market and some of the largest participants have committed to go live on our network when we launch later this year.”
Lastly, when talking about CLS’ native offerings, it appears as though the firm's products have not been well received by the public at large. This is because many of the company’s clients seem to be worried out the security aspects of the products in question.
Blockchain Comes With It’s Fair Share Of Risks
In regards to the slow adoption of blockchain technology, a report published by IBM last year showed that bankers as well as institutional players are averse to using this technology on a large-scale, since it is still prone to a lot of financial uncertainty.
Expounding further on this matter, the aforementioned IBM study noted that:
“The most difficult change for banks [when using blockchain technology] may be adopting a new attitude toward risk that includes the use of innovative practices to address it.”
With that being said, it is important to acknowledge that over the course of the past year, many top companies have slowly (but surely) warmed up to the idea of storing their data on a decentralized cloud unit— with nearly 50% of all of the world’s top banking institutions currently making use of blockchain tech in some form or the other.
Not only that, recently released market intelligence data by MarketsandMarkets shows that by 2022, the blockchain industry will be valued at $7.68 billion (and by 2024 that figure is expected to rise to a staggering $60 Billion).
As the adoption of blockchain tech continues to garner mainstream traction, experts such as Mario Singh, CEO of Fullerton Markets, says that companies need to stop adding the “blockchain” tag to everything and instead rely on real innovation to sell their products.
In this regard, Singh added:
“If I were to use an analogy of a cup of water where the water is the content and the cup is the context – blockchain is the context or the platform of communication. Innovation or value is the content. To have blockchain without solving any real issues is putting the cart before the horse.”
Echoing Singh’s sentiments, Ran Goldi, CEO of First Digital Assets Group mentioned that even the internet took nearly 25 years to get its feet of the ground, so it wouldn't be surprising if it took blockchain some more time to do the same (especially since the technology is less than 10 years old).