When the CEO of Swift
wants to learn about blockchain, he does it in style.
On stage yesterday in New
York, Gottfried Leibbrandt gathered senior executives from some of the largest
banks in the world – which also happened to be members of his interbank
messaging platform – and put them on stage with the president of one of
his own biggest (potential) competitors: blockchain startup Chain.
Speaking on stage in
front of 500 senior financial institution leaders, Leibbrandt then deftly
navigated his interrogation of representatives from a diverse group of
financial institutions including JPMorgan, Citi and CLS.
While there was no doubt
that members of the panel viewed one another as potential partners, potential
customers and definite competitors, the Swift chief summarized what they
all shared in his own closing comments: a common enemy, hackers.
Leibbrandt concluded:
"We have to be better
than them."
Joining the 'dark side'
For his part, Leibbrandt
seemed to be trying to establish a tone of camaraderie throughout his
questioning, one that found an unlikely partner in Tom Jessop, the newly
appointed president of Chain – a heavily funded blockchain startup
ostensibly out to make middlemen (like Swift) unnecessary.
But Chain has struck a
more conciliatory tone than some of its rivals such as Ripple, which has set Swift square
in its sights as the incumbent to beat. By contrast, all three of Chain's first
public clients – Citi, Nasdaq and Capital One – are what would be
considered legacy financial institutions.
Jessop came up through
the ranks at Goldman Sachs as part of the bank's fintech investing team, and
was hired by the blockchain firm last year specifically because of his ability to work with
incumbents.
In spite of the friendly
demeanor on stage, though, Jessop, alluded to criticism that his joining Chain
has been perceived as a betrayal of the legacy financial institutions from
which he came.
"People always say
to me, 'Why did you go to the dark side?'" said Jessop. "Actually, I
don't think it's the dark side. I think there’s a lot of work we can do
together, and it only happens through partnership."
Fighting for the system
Leibbrandt's own comments
on using blockchain technology to thwart criminal activities echoed earlier
statements made by panelist David Puth, CEO of foreign exchange service CLS.
Puth drew laughs from the
audience when, following Jessop’s first address to the audience, he described
Chain's value proposition, saying: "You see what I’m up
against?"
Puth also joked that
running a "systemically important financial business" might not be
the best business decision, with no pricing control and upstarts trying to take
away "pieces" of what you offer and selling it to customers in a
"different or simplified way".
To take on the
technological upstarts head-on, Jessop last year announced at Swift's Sibos conference that his
firm had partnered with IBM to work on its blockchain solution.
"When we're
competing, when we're going at innovation against the likes of Tom Jessop, we
have to think really hard about how we approach things," said Puth, who
also indicated that his firm was looking for partners similar to Chain.
The enemy of my enemy...
However, the general
consensus among the panelists was that whatever the differences between the
participants, they were on the same side against criminal adversaries.
To stay one step ahead of
bad actors, both the strengths of the legacy infrastructure providers and the
innovation of blockchain startups need to be leveraged over the long haul,
according to Emma Loftus, managing director and head of global payments at the
US division of JPMorgan Treasury Services.
Speaking at the event,
Loftus, whose company recently joined the Enterprise Ethereum Alliance and open-sourced
its ethereum-based private ledger called Quorum, positioned partnerships across
borders and via consortia as crucial to fighting fraud.
But she went a step
further, calling collaboration between blockchain startups and the legacy
financial system as one of the great challenges slowing widespread adoption.
"This traverse from
traditional to blockchain and the requisite interoperability is why people are
taking a very thoughtful approach before jumping in to replace
everything," said Loftus.
Innovate or lose
Charles Blauner, global
head of information security at Citi – another 'bulge bracket' bank adopting
blockchain – had advice of a different sort for industry startups
confident that their cryptography is the solution to every financial security
problem.
Blauner cautioned blockchain startups that all cryptographic
algorithms degrade over time, and that like the Roman cipher
wheels of the past, even the most sophisticated encryption
might be hacked by quantum computers and more.
As fintech startups
achieve wider adoption, he warned, they would become more profitable and
"the volume of attacks from potential adversaries will grow".
In addition to building
platforms with easily upgradable cryptographic algorithms and intensely testing
the protections, Blauner also advocated for even closer collaboration between
those who might otherwise be considered competitors.
"The bad guys, the
adversaries … collaborate brilliantly, innovate rapidly," said Blauner.
"If we can’t do the same thing, we’re going to lose and so we have to be
better than them at innovation. We have to be better than them at collaboration."
He concluded:
"Otherwise,
statistically speaking they win, we lose."
Disclosure: CoinDesk is a subsidiary
of Digital Currency Group, which has an ownership stake in Chain.
Swift panel image via Michael
del Castillo for CoinDesk
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