Martha Muir rightly points to the growing skepticism about blockchain after the failed experiments of 2022 (report, FT.com, December 30).
Blaming technology certainly resonates with the public. But the variety of protocols and sectors involved complicates the narrative that blockchain is the problem. Instead, there are several reasons why these projects collapsed.
Above all, this includes the lack of interoperability with existing legacy systems. The abandonment of the Australian Stock Exchange’s blockchain upgrade was not due to a flawed technology, but to the fact that the project aimed for a complete system overhaul. This required linking to existing partner and customer records, which ultimately proved too costly and administratively burdensome.
The lack of targeted regulation was also extremely problematic. One look at the FTX crisis is enough to understand the importance of regulation as a means of creating trust and legal certainty – two important pillars for success.
Blockchain is already bringing significant efficiencies to financial markets, from US services firm Depository Trust & Clearing Corporation for stock settlement to Italy’s Spunta for bank-to-bank reconciliation. To realize this potential at scale, it must operate within the infrastructure and regulatory environment of the very systems it is attempting to disrupt.
Alisa DiCaprio
Chief Economist, R3; Former Chair of the US Department of Commerce Fintech Committee, New York, NY, USA
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