A new range of opportunities
By Carlo Reding (Grant Thornton)
Blockchain based technologies (distributed ledgers, also called Distributed Ledger Technologies or DLTs) enable transactions between participants in a secure, trusted and immutable way, without relying on a third party. The blockchain is distributed and replicated between all participants, allowing unforgeable and fully traceable transactions.
These technologies have experienced phenomenal growth since 2015 attracting more and more interest to become both a hot media and press topic (front page in Financial Times, The Economist or Bloomberg) as well a key agenda area for The World Economic Forum (1), The European Securities and Markets Authority (2), and the British Government (3).
High expectations and growing appetite from different players
For pure technology players, blockchain creates the opportunity to offer development and technology services. Blockchain as a Service (BaaS) solutions are developing, contributing to the emergence of an ecosystem of users and experimenting interoperability of the technology with existing products.
For large corporate and financial institutions, blockchain technology appetite is growing with objectives such as cost reduction, innovation and exploration of new business models. The underlying promises are guaranteed trust, security, streamlining and simplification of transactions.
For individuals, the decentralized protocol of blockchain can bring a new concept of ownership, as well as a unique opportunity to free from dependencies towards central institutions while performing online operations or identifying in any digital environment.
For legislators and regulators, blockchain brings a challenge to adapt existing regulatory framework as well as an opportunity to audit processes in real time and get reporting on demand. Several initiatives are under way to draw the foundations of future market rules, and discussion are on- going with blockchain representatives to define the most adapted legal and regulatory framework.
1 See the report on the future of financial infrastructure on the WEF website
2 See consultative document published in 2016
3 See report from the UK Government
Areas of disruptions and challenges
In its current maturity, blockchain is becoming somewhat fashionable with many players looking into the topic with various areas of concrete implementation. As these projects progress, the actual implications of what can be seen as a paradigm shift are starting to surface
- How can blockchain solutions dialogue and integrate in existing ecosystems and interface with legacy infrastructures
- How can blockchain become a way to rebalance relationships and engage into new business models where customer’s interest and experience are central?
- What are the regulatory, legal, financial, operational, organizational, competence implications of running businesses through blockchain? How do we invent new operating models that unleash the potential of blockchain?
- Would it be necessary to achieve common standards for interoperability on different distributed ledgers?
These wide-open questions are stretching the thinking and levels of knowledge. Yet, a couple of driving principles are emerging. The maturing of blockchain will take place over time through an iterative approach whereby each initiative enables the current knowledge to grow. The approach to blockchain cannot be looked as a technology only topic. The ability to gather competences across the spectrum are key to support the mapping out of the various implications integrating the complexity of existing situations.
Gearing up to manage transformation
The path towards blockchain is more than mere change; it has the potential to drastically transform a number of areas. The path to concrete implementation is a complex journey, requiring a range of experience and expertise.
Grant Thornton has embarked from the start in the creation of a multidisciplinary pole of competence and developed a blockchain lab in Spain that research about new use cases implementing distributed ledgers. The vision of GT in this field is to partner with Financial Institutions to leverage blockchain as a game changer for the emergence of new ecosystems. GT Spain has also been working on blockchain and DLTs initiatives with companies from different sectors such as Insurance, Energy, Health, Construction and Automotive.
The team regroups professional experts: technology engineers developing proof-of-concepts, financial analysts analysing the economic viability of developed products and services, business consultants providing an advisory approach in order to define associated business models, as well as lawyers and compliance officers studying legal impact and contributing to the definition of future legal and regulatory framework.
The team culture is based on innovation entrepreneurial spirit, global thinking and cross-border. The blockchain lab created a sandbox with start-ups in order to carry out projects in Spain, and is engaged in similar initiative in Luxembourg, where Grant Thornton has been an active player in the Fintech ecosystem since 2014, helping start-ups in licensing, auditing or accounting processes. More recently, Grant Thornton Spain together with Grant Thornton Luxembourg and Finside Advisers have joined forces to take up the KYC and digital identity PoC challenge provided by Eggsplore.
Many more steps will be needed to integrate blockchain in our daily environment. Transversal initiatives can surely accelerate the process.
About the author
| Carlo Reding is the head of the Financial Services practice of Grant Thornton Luxembourg (GT Lux), which offers both regulated and non-regulated services to its financial sector clients. Carlo has broad and varied experience in the financial sector and has a good view on the different services that professional service providers offer to this sector.
Carlo is a Directeur Agréé CSSF, Expert Comptable (Luxembourg), Réviseur d’Entreprises (Luxembourg) and
Court appointed liquidator for one of the Luxembourg Madoff infected SICAV’s.
Within Grant Thornton, Carlo is a director of Grant Thronton ABAX Investment Services, a Central Administration and Transfer Agent for alternative funds under the regulation of the CSSF. He is in charge of FinTech and technology services as well as Compliance AML / KYC, BRS and Internal Audit services.