Honestly, I struggle with blockchain (I’m not too proud to admit it). On the one hand, I honestly believe that it’s the most transformative thing to come to finance since Netscape launched its first browser in 1994. On the other hand, something this massive will take years before its true impact is felt. Of course, competitive dynamics and regulatory regimes will play a big role in how and how fast blockchain is adopted. So, let’s just say I’m cautiously optimistic on blockchain’s future.
Today’s guest is Alex Tapscott who runs Northwest Passage Ventures which works to build blockchain companies with capital and other resources.
Alex’s interest in blockchain stems from a research project he conducted a few years ago at the University of Toronto. Recruited to write a report on bitcoin and what it meant, among other things, for financial services industry, this experience set off a series of deeper research. Many projects later and through collaboration with his co-author, Don Tapscott, Alex recently published Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World.
Alex joins us this week on the podcast to discuss blockchain and its potential impact on the firm, the financial services industry and capital markets in general.
Below are lightly edited and condensed highlights from the conversation.
Why do you think blockchain is going to be so transformational?
After a few years of research, we’re convinced that blockchain technology represents nothing short of the next generation of the Internet. And as a result, it’s going to have a profound impact on financial services, as well as on business and society. When you use the internet today to move, send, or share information, you’re not sending an original — you’re sending a copy while retaining the original. That’s one of the advantages of the internet: we have a printing press of information. But the problem is, when it comes to things of value, like money, stocks, bonds, sending a copy is a really bad idea. It’s OK to have a printing press of information, but it’s not good when it comes to assets of value. The blockchain is the internet of value.
Do you think blockchain is a threat to incumbent players in the financial services industry?
It’s not a threat — it’s a technology that’s going to change the industry. It really depends on how financial services firms respond to that change. Those who do it right will succeed. Those who don’t will not. Financial services professionals shouldn’t only think how this technology could optimize their businesses, but how blockchain can help them do something previously thought unattainable.
What about the role of the stock exchange in the blockchain world?
It’s my opinion that most financial assets will be issued on this new native digital format. The role of the brokerage goes down because it’s easier to connect buyers and sellers peer to peer. But maybe the role of the issuer actually becomes more important. Someone is going to have to reissue hundreds of trillions of dollars of notional value of securities on the blockchain. It’s almost like the origination function of financial services becomes more important over time.