Unlike other financial instruments, cryptocurrencies do not have any intrinsic value and are not derivative of centralised assets. Instead, the value allocated to a cryptocurrency by the market is a consequence of what investors and traders believe its value to be.
As faith in the crypto markets wanes along the currents of speculative volatility and alleged market manipulation, this article explores recent adoptions of DLT by industry heavyweights signifying the real value created by this innovative technology and its adaptations.
IBM and OMFIF
IBM Blockchain is a long established enterprise blockchain provider, with hundreds of clients across a range of industries benefiting from improved transaction speeds and security. In a report jointly published with the Official Monetary and Financial Institutions Forum (OMFIF), an independent think tank focusing on central banking, economic policy and public investment, IBM surveyed 21 central banks and found that 8 of them are currently conducting trials around a digital central bank currency. This cryptocurrency would be used in inter-bank transactions with the report finding that it could lead to “significant improvements in efficiency, speed and resilience, as well as lower the cost and complexity associated with existing payment systems”.
Central banks were supportive of the notion, particularly as the move would eliminate credit risk, ensure the crypto asset’s price stability and place liquidity control directly in each central bank’s control. The report signals promising institutional and industrial attitudes, and it is likely that such cryptocurrencies introduced by central banks will be tethered to the value of national currencies to aid transactional efficiency.
Sony Computer Science Laboratories
While cryptocurrencies have been proven to act as stores of value, one of the main bridges for the technology to cross is their use in everyday transactions. On Friday 26th October, Sony SCL announced that it had developed a hardware wallet utilising Integrated Chip Smart Card technology to connect with a cryptocurrency ecosystem. Sony’s hardware wallet is contactless and has the ability to generate and store private keys using a tamper-proof module. The launch of this wallet increases private key security and lays the foundation for the technology to be adapted to accommodate every transactions, much like a debit card.
It was announced on Wednesday 19th September that 15 global institutions, including ABN AMRO, BNP Paribas, Citi, Koch Supply & Trading, Shell and Societe Generale, had come together under a joint venture dubbed “Komgo SA” with a view to digitising the trade and commodities finance sector through an Ethereum-based platform to be developed in partnership with ConsenSys. The venture seeks to launch a decentralised KYC platform and begin issuing digital letters of credit before the end of 2018. The ambitious venture could generate significant global economic consequences given the partnership of cash-heavy commodity and finance industry titans.
Interbank Information Network
JP Morgan has been trialling its blockchain payments network “Interbank Information Network” (INN) since October 2017. In October 2018, it announced that over 70 banks would be joining the Network for testing purposes, including the Royal Bank of Canada and Santander. The INN seeks to share DLT across banks to aid with efficient payment settlement by centralising data for resolving compliance checks, missing data and incorrect addresses.
IBM Food Trust Platform
With a focus on assisting suppliers, wholesalers and retailers through food product tracking across the supply chain, IBM’s Food Trust Platform (FTP) is a fully-deployed enterprise-level blockchain solution. Launching in the beginning of October 2018, the announcement was coupled with the fact that Carrefour, the French supermarket titan, had also signed up for the platform. Carrefour is joined by Kroger, Unilever, Walmart and Nestle. If successful, IBM’s FTP could revolutionise the food supply chain, minimise contamination and allow for multi-directional traceability to aid accountability.
Industry adoption of DLT is premised on the utility of quicker transaction times, lower transaction costs and operation within a secure environment. The future holds promise for DLT-integration into major pre-existing industries and national governance systems, and we expect to witness rapid global adoption with the passage of time.
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