The Boston Convention and Exhibition Center, located in the rapidly growing Boston Seaport district, proved a fitting location for Innotribe’s series of digital currency seminars and talks at the Sibos 2014 technology and innovation trade show.
Innotribe’s bitcoin series included talks on regulation, disruption and the future of investment in the space. The crowd, comprised of a mix of digital currency veterans and novices alike, displayed an enthusiasm and critical eye that largely defined the day’s events.
is a startup and innovation project started by financial network operator Society for Worldwide Interbank Financial Telecommunication (SWIFT).
Amidst the backdrop of a broader banking trade show and exhibition composed of the banking industry’s biggest players, the Innotribe talks pointed to the next generation of financial technology that, for now, remains just outside the broader financial space.
Opening talk casts wide net
The first seminar offered a broad overview of digital currency development and the issues shaping the industry today, looking at whether the technology represents what panel experts frequently dubbed “the future of money”. The session was co-hosted by Anthemis Group founder Udayan Goyal and banking expert and author Chris Skinner.
Speakers such as Bitcoin Foundation executive chairman Jon Matonis, bitcoin entrepreneur and SecondMarket founder Barry Silbert and Circle co-founder and CEO Jeremy Allaire weighed in on what’s driving regulation development, consumer adoption and technological advancement in the space.
During the wide-ranging session, the panel – which also included Ripple Labs co-founder and CEO Chris Larsen, colored coins inventor Yoni Assia and SWIFT CEO Gottfried Leibbrandt – ultimately agreed that almost all areas of technology have the potential to be reshaped by digital currency.
Larsen said during the panel that behind the growing optimism for bitcoin’s use as a globalized currency, many companies are beginning to recognize the benefits that the block chain offers.
When asked where digital currency technology is heading, Assia pointed to projects like his colored coins concept and platforms like Ethereum, Counterparty and ClearingHouse as protocols that can move block chain applications away from currency usage to broader use cases.
“You can use this technology to actually transfer any type of value," he added.
Entrepreneurs meet regulators
With regulation no doubt on the mind of most bitcoin business owners and entrepreneurs, Innotribe brought together a diverse mix of leaders and regulators to discuss how, if at all, the technology should be subject to governmental oversight.
Moderated by Promontory Financial Group director Adam Shapiro, the panel touched on regulatory topics such as consumer protection, anti-money laundering (AML) and know-your-customer (NYC) standards and the concept of self-regulation as they relate to digital currency.
remarked during the opening of the session that a recent publication by the US Consumer Financial Protection Bureau (CFPB) reflected broader problems with the approach that American regulators are taking.
Matonis said:
Calling bitcoin a hedge against “monetary aggression”, Matonis added that consumers benefit greatly from using a transaction and value system independent from some of the geopolitical pressures that can harm economies, as demonstrated in recent years by some Latin American currencies.
During the session, the regulatory body was represented by Dirk Haubrich, head of consumer protection and financial innovation for the European Banking Authority, and Anne Shere Wallwork, senior counselor for strategic policy for the US Department Of the Treasury’s Office for Terrorist Financing and Financial Crimes.
Both regulators stressed repeatedly that their respective agencies are interested in providing an avenue for future development, but not at the cost of putting consumers and business at risk.
As Wallwork explained during the session:
At the same time, Wallwork said that there could be applications of digital currency technology to her agency’s broader regulatory efforts. She opened the door to potential usage in the future, adding:
However, Haubrick voiced concern with the possibility that coin developers can anonymously submit or change code. Most financial institutions must follow strict guidelines on when and how financial software can be updated and deployed.
Haubrick queried aloud that there isn’t a clear answer, saying:
Cooperation opportunities
Though the content of the discussion suggested a divide between regulators and digital currency entrepreneurs, the event included a notable show of cooperation between the two groups when Silbert and Wallwork shook hands before the assembled crowd.
Silbert remarked that the rapid evolution of the bitcoin industry has seen a changing of the guard from companies that operated largely in the regulatory shadows to businesses that want to actively engage with regulators.
Silbert told the crowd:
Silbert added that regulators need to be mindful of the fact that bitcoin’s technological infancy and distributed nature makes it particularly susceptible to stifling rule-making, particularly across national jurisdictions.
The last segment of the panel looked at the issue of self-regulation. Stan Stalnaker, founding board member and treasurer for the Digital Asset Transfer Authority (DATA), discussed how the industry can work harder to interface with governments worldwide to find agreeable solutions.
Stalnaker explained:
Industry leaders detail distruption
One of the major focuses at this year’s Sibos gathering in Boston was the role of disruption in financial technology. As one can imagine, this buzzword was on the lips of nearly every panelist, including the session led by a group of bitcoin industry CEOs.
Circle CEO Allaire led a demonstration of his company’s bitcoin banking platform, which formally launched today. He walked through basic functionality, including actually sending transactions, showing the process for attendees.
Explaining that Circle is “taking something that took days or weeks to do and simplified it down to minutes”, Allaire remarked that instant access to deposits through trusted intermediaries will eventually become the norm in the bitcoin space. He also showed off the company’s upcoming mobile apps, which will be available for both iOS and Android phones.
CEO Marcus Swanepoel previewed his company’s emerging markets-focused bitcoin exchange, telling attendees that “the emerging market is an entirely different system.”
He explained that BitX sees the potential opportunity in working with merchants in markets that do not have much bitcoin saturation.
Swanepoel said that this outlook is buoyed by the fact that banks in these environments are more receptive to block chain integration than institutions in developed economies, saying:
Swanepoel also shared details of BitX’s secretive Falcon project, which is a new protocol for fiat-to-fiat transactions that uses the bitcoin block chain as a clearing mechanism. He said that the company has tested the durability of the system with promising results, but argued that conditions in emerging markets aren’t quite ready for broader bitcoin saturation.
, founder and CEO of digital currency exchange CRYEX, said that the ecosystem in which people buy, sell and trade bitcoins was forever altered by the collapse of the now-defunct Mt Gox bitcoin exchange.
Millar said of aftermath:
The goal of CRYEX, he said, is “to pool as much liquidity into one exchange as possible so you can provide order depth” and improve overall confidence in the system.
He was preceded by Yoni Assia, who detailed the colored coins concept and its potential to push smart contracting into the mainstream.
Can digital currency disrupt – or help – the banks?
Moderated by Dan Marovitz, CEO of Faculty of 1000 Ltd and former Deutsche Bank managing director for global transaction banking, the last session of the day looked at a “post-bitcoin” space in which next-generation protocols and services facilitate new kinds of transactions.
The session, entitled “Disruption, Big Banks & VCs”, featured Richard Ni, Dan Elitzer and Jeremy Rubin, the leadership team behind the MIT Bitcoin Project, and Ethereum creator Vitalik Buterin, as well as a group of developers that included some of those involved with the MIT Bitcoin Project’s recently summer-ling app contest, MIT BitComp.
Rubin told the crowd that, fundamentally, the purpose of the initiative is to give bitcoin a place in which use cases can be created based on demand, stating:
Ethereum’s Buterin suggested that from the perspective of banking, next-generation block chains can help connect the underbanked or unbanked to financial pipelines worldwide. Buterin discussed the use of block chain technology as part of a broader network of physical assets.
Further, Buterin provided a walkthrough of the code for a sample smart contract on Ethereum, adding that new intiatives are in the works that will make the protocol even faster – a key factor in whether banks ultimately embrace the block chain as a data mechanism.
Buterin explained:
Questions and answers
Following the presentations, a panel of banking and venture capital experts answered questions and comments from the assembled crowd. Standard Chartered Bank managing director Gautam Jain and Citi managing director Ebru Pakcan were among those who shared enthusiasm from within their own industry toward bitcoin, but stopped short of endorsing it.
As Jain expalined:
While noting that “there are lots of Vitaliks out there looking for ways to put people of the job”, Silbert said that banks and bitcoin fit well together and can actually significantly reduce the infrastructure costs incurred by banks.
Mircea Mihaescu, managing director for Sberbank Digital Ventures and SBT Venture Capital, told attendees that the level of investment in bitcoin companies needs to rise significantly before banks begin to even consider getting involved.
“We have 40, 50 bit coin startups with funding – we need 500, 2000,” he said. “Then, we will begin to see real change.”
Citi’s Pakcan said that the bitcoin industry needs to understand as a whole that it’s too easy to assume that digital currency can reshape banking for the better. She argued that, to the contrary, many of those who point to specific problems don’t understand the full picutre, saying:
, global head of transaction services for Dutch banking group ING, said that there is no timeline among banks for when, if ever, an integration may occur. However, he acknowledged that the industry as a whole isn’t ignoring digital currency.
“We’re certainly interested. We’re not in wait-and-see, but maybe a wait-and-act mode,” he offered.
Images via Innotribe, Shutterstock