The World Economic Forum ended yesterday. Tech and finance professionals discussed blockchain technology and cryptocurrencies. Wall Street thinks cryptos are dead, but not everyone agrees.
The World Economic Forum (WEF) has always been more of a stage for the world’s establishment than a startup conference. But it does also serve as a platform to discuss new ideas and innovation.
He was part of a panel on digital financial assets, moderated by CNBC. In the spotlight: Liechtenstein’s Blockchain Act, solutions for institutional investors to invest in digital assets and the challenges of safe storage.
While blockchain technology and Liechtenstein’s regulatory efforts received some attention at this year’s forum, the technology hype from last year has faded away. Instead, there was a greater focus on practical solutions.
Bankers say: blockchain, not Bitcoin!
The banking industry’s narrative at this year’s WEF was “blockchain, not Bitcoin!”
First in line, PayPal CEO Dan Schulman. “We’re not seeing many retailers at all accept any of the cryptocurrencies,” he said. Yes, but then again, PayPal recently started to accept withdrawals from Coinbase via its service. Irony?
Nevertheless, Schulman was optimistic about the future of blockchain technology. But just blockchain, not Bitcoin!!!
Next was Huw van Steenis, senior advisor at Bank of England, who said cryptocurrencies “fail the basic tests of financial services.” He said cryptos are slow, and don’t work well as a medium to transact value.
Jeff Schumacher, founder of BCG Digital Ventures, said Bitcoin will go to zero, as it’s “not based on anything.” Fair enough, but that’s the same with fiat currencies like USD or EUR.
Why the crypto bashing?
The crypto critics are not wrong. There are not many retailers that accept cryptocurrencies. And yes, cryptocurrencies are slow and highly volatile.
But that doesn’t mean they are completely useless.
Technology evolves. And new technologies get adopted over time, it’s not an overnight process.
Few people in the blockchain and crypto community believe the technology is perfect or even ripe for mass adoption. The issues mentioned in Davos are well-known.
The good news: Most attendees agreed that cryptos are not dangerous. When a panel discussion ended with the question whether “the whole thing is totally overhyped and quite dangerous,” only one member of the audience raised his hand: the CEO of the payments system Swift.
Not all dark and gloomy …
The WEF attendees mostly regarded blockchain as a promising technology. The focus was hereby on the use cases of the technology, not on the technology itself.
“I am much less interested in investing around bitcoin as a currency unit or a currency equivalent, or even the blockchain as an accounting ledger. I am thinking much more about the protocols. In other words, what is the underlying protocol going to do,” said Glenn Hutchins, chairman of North Island.
Great point. Users only care about the end product and added value anyway.
And that’s also true for cryptocurrencies. Elizabeth Rossiello, the founder of African digital payments platform BitPesa, explained how her company allows people to transfer funds by using bitcoin to move money across borders.
“We don’t want to replace the local African currencies […] we want to make it easier to have African currency pairs,” she said.
Likewise, 500 Startups Partner Edith Yeung sees a use case for cryptocurrencies in Asia. As payment infrastructures in developing countries are less sophisticated than in the west, it will be easier to implement a new system from the ground up, she says.
Thus, not everyone at the WEF agreed on the “blockchain, not Bitcoin” script. Cryptos are not dead, they are not yet alive.
Or to say it with the words of crypto journalist Joseph Young: Blockchain, not bitcoin, is like saying, “airplanes will go to zero while engines have potential.”