KEY CONCLUSIONS:
- Blockchain is changing the rules of the game across industries
"We interviewed about 3,000 organisations from all industries across the globe. Only 8% of them today are in actual implementation or a pilot. The good news is that there is another 25% <...> that are in the exploration and investigation process to implement within the next 12 months. <...> 33% of the industries that are on blockchain come from the financial services. The second is the government sector with about 29%, and the next one is healthcare with about 27%," said Kyriakos Kokkinos, Executive Director, Partner, IBM Europe.
"According to Ernst & Young, in 2012–2016, total investments in this technology amounted to ca. USD 1.4 billion, whereas in 2017 the distributed ledgers are expected to attract up to USD 1 billion in bank investments. The banks estimate the resulting savings at some USD 20 billion," said Olga Skorobogatova, Deputy Governor, Central Bank of the Russian Federation.
"We are about to see many of the conventions of banking exploded [by blockchain]," said Brett King, Founder, Movencorp Inc.
"Most of the startups today raise funds through ICOs. Over the last 12 months, some USD 330 million was raised through ICOs and venture investors," said Vladislav Martynov, Chief Executive Officer, Yota Devices.
CHALLENGES:
- No regulatory framework for blockchain technologies
“The issues that need to be tackled urgently include identification of users and linking them to the legally material actions, digital traceability of products, and dealing with ownership titles to protect property rights. If we transition to distributed ledger systems, we will have to provide electronic protection of ownership rights," said Igor Shuvalov, First Deputy Prime Minister of the Russian Federation.
"The existing regulations are not robust enough to work in a real-time dynamic environment," said Brett King.
"We do collaborate with the regulators. One of the unknown [factors] is the regulatory framework around these technologies," said Marc Luet, Division Head, Russia, Ukraine and Kazakhstan, Citi.
"The blockchain projects are already raising tens of millions of dollars. Crowd investment is the new fund-raising technique. If it becomes legitimate and regulated, we will see a dramatic increase in business activity," said Aleksandr Ivanov, Chief Executive Officer, Waves Platform.
- Low mass awareness, about risks in particular
“It is critical to tackle the issues of scalability, confidentiality and security for technologies to be available to millions of people with no exposure to high risks. People as users, programmers, the company and regulators should have an understanding of the core of technology, its underlying principles, ways of using it to integrate it across all industries to their benefit,” said Vitalik Buterin, Founder, Ethereum.
- Identification issues
“Within ten years, I don’t think that banks will be involved in the identity business at all. I don’t think banks will do KYC in ten years. <…> We’ll be able to use blockchain to monitor the cash flow. This requires the regulators to build artificial intelligence and network monitoring tools, these sorts of things that will be more effective in the future. It reduces the workload on banks and it reduces the workload on consumers, and ultimately will be a far more effective tool for regulators,” said Brett King.
SOLUTIONS:
- Government support of the digital economy
“Blockchain is one of the core straight-through technologies to drive all sectors of the Russian economy,” said Nikolay Nikiforov, Minister of Communications and Mass Media of the Russian Federation.
“The most rapid pilot projects and potential areas for rapid breakthrough are document flow related to LOC investments deals, the Masterchain Project, as well as projects on certain types of the Federal Service for State Registration, Cadastre and Cartography’s transactions that may be executed in an automated 24/7 mode,” added Nikolay Nikiforov.
“It is necessary to be at the forefront of the ongoing revolution. As of now, a prototype that enables exchanging financial messages has been developed and tested jointly with banks; a platform for creating innovative financial services is being developed; cooperation with central banks of EAEU states and international regulators is in progress,” said Olga Skorobogatova.
- Decentralisation of systems and data to make information more reliable
“Georgia has for the first time brought blockchain into real life. This technology is used to completely decentralise the data now stored not only on the register as a databank, but also by each citizen,” said Valery Vavilov, Founder, The BitFury Group.