Jim Cunha, the senior vice president of the Federal Reserve Bank of Boston, has expressed confidence that the advent of blockchain technology will not spell doom for most of the large organizations that are currently dominating the financial sector.
Alluding to the apparent tension between established players in the field and innovative newcomers, he said:
“The disrupters begin the process like they’re gonna take over the world and get rid of every bank and intermediary there. The incumbents first defend and say, ‘you don’t know our job, you don’t know our world,’ and then they partner, eventually. That’s what you’re seeing right now. Every major bank has a partnership or is building their own platforms. Every single middleman, NASDAQ, and CLS, and all them, they’re all partnering – SWIFT is partnering to try to do something. So here’s what I think: the partnering will be where the ultimate success is.”
Cunha made the comments during a keynote speech on the topic of “Bitcoin, Blockchain, and Cryptocurrency” at Fintech: The Impact on Consumers, Banking, and Regulatory Policy – a conference organized by the Federal Reserve Bank of Philadelphia.
During the Q&A session that followed his address, an audience member asked whether the international payments network known as the Society for Worldwide Interbank Financial Telecommunications (SWIFT) stands to be replaced by blockchain-based competitors. Crypto-enthusiasts have speculated that, because blockchain technology enables the transfer of value across borders at speeds that are orders of magnitude faster than what SWIFT can offer at a lower cost to private individuals, the network may eventually become obsolete.
“Of any incumbent that’s a middleman – which the Fed is, stock exchanges are, SWIFT, Clearing House, you know, we’re all middlemen and I wouldn’t say that the FinTechs are going to put us out of business, necessarily. I think what they will do is wake us up in some cases to be a little more innovative with some of our systems in a way … that’s positive. I don’t see the technology personally disrupting SWIFT. I may see it creating competition or making them be better, but I don’t see the future of SWIFT going away, I think it only helps to add competition.”
He nonetheless acknowledged that some actors and organizations harbor malice towards industry titans. Speaking of Overstock, he noted that “the CEO is a self-proclaimed Wall Street basher, and what they want to basically do is eliminate any activity within Wall Street.”
Overall, though, he spoke with optimism about the future of finance, referring to token offerings (popularly known as initial coin offerings, or ICOs) as an “area to watch” because of the changes that they herald in the field of venture capital. He also recommended that cryptocurrency trading should remain subject to know-your-customer and anti-money laundering protocols but that regulation should stop there, lest it becomes overbearing and hampers innovation. Law enforcement agencies are as capable of combating crime as ever, he opined, even crime involving cryptocurrency. For evidence, he cited the FBI’s success in shutting down the online narcotics marketplace Silk Road and arresting its alleged founder, Ross William Ulbricht.