IBM was on the verge of becoming a dinosaur. One of its biggest investor, Warren Buffet, who is known for his investment strategy, sold his stake a while back because he failed to see any value. But IBM has not only turned the corner by using the blockchain technology, it is also leading the space. The entire idea behind cryptocurrencies like Ripple is that it is efficient and fast for cross-border payments.
Cross-Border Payment Idea Under Threat
We.Trade, a blockchain application to process cross-border payments built on IBM’s blockchain platform, is built by nine banks (UniCredit, Deutsche Bank, HSBC, Santander, Rabobank, Nordea, KBC, Natixis & Société Generale) to address this subject. We.Trade has already produced positive results in its testing stage. The target market is small and medium-sized businesses and a proven track record would easily open the door for more commercial use. It opposes a serious threat to cryptocurrencies which are targeting this area and selling the idea that consumers must use their coins.
As I have said a few times before, it is important to keep in mind that blockchain is equal to trust and banks trust big names. They would be more likely to work with the names which they already have a history of working relationship with. But, the entire idea of cryptocurrencies is to remove the middleman and facilitate the transactions from one user to another. By removing the banks or servicing the clients who do not have bank accounts due to several reasons, the current cryptocurrencies do stand a serious chance of success.
The regulatory sandbox is another area which is serving as a double edge sword. It is an initiative which was adopted by regulators to let innovators test their technologies in a controlled fashion. The regulatory sandbox initiative supports and promotes competition. The area of raising equity/debt, asset management and insurance stand taller in the banking space. A mammoth number of projects in the cryptocurrency space are geared to resolve this issue. During the fourth round of FCA regulatory sandbox submission, 69 submissions were received. Out of 69, 29 projects will be starting their test stage and nearly half of them would be using the distributed ledger technology to address the above problems.
Double Edge Sword: Regulatory Sandbox
The sandbox approach does give hope for innovators to come and test the technology before it can be scaled out. When I spoke to Catalin Ivan, member of the European Parliament, we agreed when he said, “I believe that sandboxes are welcome, they help to identify the best practices. Sandboxes would help in creating partnerships between big companies and start-ups.”
However, it is important to keep in mind that if bigger firms become more successful and they have the blessings of regulators, they would have much higher chance to abolish a vast number of projects in the cryptocurrency space which are trying. Thomas Moser, governing member of the Swiss National Bank told me, “I think you are right that big corporates have a number of advantages over those start-ups, in particular, they already have a customer base and a lot of data; on the other hand, they tend to lose their agility as they grow.”
The bottom line is that companies would have to do something completely different to become really prominent and only then they would stand a chance to become a leader. In a lot of scenarios, big corporates would just buy them out if they can serve a unique purpose to eliminate the threat.