Blockchain and Our Disintermediation Problem

By Stewie Zhu, CEO and Founder of DCC

The blockchain industry is without a doubt evolving rapidly with increased involvement from regulators (i.e. SEC, CFTC), globally renown corporations (i.e. Starbucks, IBM, etc.) as well as institutional players now getting their toes wet. From the likes of Fidelity offering crypto custodian and trading services to Morgan Stanley recognizing cryptocurrency as a legitimate asset class, Wall Street is taking notice of this emerging technology, in a big way.

It is interesting to see how many people have changed their tune from “Bitcoin is for fraudsters and criminals” to “Bitcoin is a viable store of value.” Jamie Dimon from JP Morgan is among those who changed their minds and even decided to get in on the action with the announcement of their own JPM Coin which is designed to help institutions with the settlement of funds. While this could serve as competition to Ripple’s XRP, JP Morgan’s coin will be private and permissioned, which means it is not open to the public.

This is a common debate among diehard blockchain supporters on whether permissioned blockchains have a place in moving the financial system forward. Of course, Ripple’s founders believe that a “bank coin” is not going to revolutionize anything besides JP Morgan’s internal processes and that they are “missing the point.” However, do private blockchains make sense for certain organizations OR does that truly defeat blockchain’s purpose altogether in removing intermediaries?

The legal scholar Kevin Werbach argues that perhaps blockchain shouldn’t be the solution to the intermediation problem, but instead could be a supplement or complement to “conventional legal regimes.” Intermediaries can serve a major purpose connecting people that might need a specific service that is being offered. And because intermediaries when trustworthy, can serve a major purpose, there’s not enough of a consensus that want to completely remove them. He believes that blockchain can, for example, help mechanize the enforcement of reporting rules for banks so that they don’t need extra resources monitoring this.

I often find that centralized institutions, like banks, engage in profiteering and are involved with intermediaries that take advantage of customers by charging arbitrary fees for transactions. In certain instances, this process should be streamlined and with blockchain it can be eliminated entirely.

While it is still too soon to tell if blockchain can improve and make every single facet of business more secure and reliable, the work that many companies are doing to test its power is nothing short of revolutionary. One thing is for sure, the potential of this innovation is limitless, and it is our duty as a society to aspire to a globally inclusive financial world.