Financial services advisor Ernst & Young has produced a report on blockchain technology titled ‘Blockchain reaction: Tech plans for critical mass’ which looks into the upcoming potential for the technology. In the report, Ernst & Young review blockchain technology’s potential to streamline and accelerate business processes, increase cybersecurity and reduce or eliminate the roles of trusted intermediaries and centralized authorities in industry.
Paul Brody, EY Americas Strategy Leader Technology Sector, commented: “Blockchain shifts cybersecurity from depending on one to depending on many, and a large volume of people are much more trustworthy than any one individual.”
Besides looking at some early use-cases for blockchain, Ernst & Young examined when the time would be ripe for the disrupting different industries, anticipating critical mass in financial services technology in a 3- to 5-year time horizon, with other industries following quickly. It noted that the nature of that pivot, and the tax, legal and policy questions it will raise, will take time and preparation.
Financial Services Blockchain and Distributed Infrastructure Strategy Leader at Ernst & Young LLP (US), Angus Champion de Crespigny remarked: “Blockchain is developing much faster than anyone expected. To think the impact to your industry is many years away is very risky.”
The report stated that the onset of the technology may be accelerated by the fact that the global economy is currently undergoing digital transformation and as a result many companies are already set up with most of the digital infrastructure required to harness blockchain potential.
In looking at the state of blockchain in financial services at the moment, the report described some uses, such as providing efficient ways to enable services like transferring equities or other financial instruments in blockchain environments with faster settlement and lower transaction costs.
However, in the future it was imagined that markets would be self-running run, with finance embedded into the activities taking place within those markets. An example given was a blockchain hosting all-inclusive records of an automotive ecosystem whereby ownership, financing, registration, insurance and service transactions could all be tracked together. In this situation, a blockchain would make it possible for a manufacturer of driverless cars which could run itself whilst providing a cut of the revenue to the manufacturer.
Other blockchain scenarios that were proposed included: Embedded health, Eliminating digital rights theft, New credit markets for low-cost assets, Government tax enforcement, Industrial IoT and others.
In order to benefit from this, the report suggests that companies get involved in the scene as early as possible, as so many big financial and tech companies already are. It also warned being too slow on the uptake and ignoring the tax implications of investment and operational decisions until the last minute could result in significant complications.
Channing Flynn, EY Global Technology Sector Leader Tax Services, explained: “To date, blockchain has transformed only people’s thinking. We don’t yet even know all the questions blockchain technology will raise, much less the answers. But waiting for the technology to take hold is too late. Now is the time to start defining the questions and influencing policy that will lead to answers.”