Blockchain and the Virus
The current top news story, and one that looks set to continue for some time, is the Covid-19 coronavirus and its impact on world health and the world economy. The most tragic impact is of course on people’s well being, but the spread of the virus is also having and will continue to have a major impact on business and the global economy. Against this background, a friend of Hex Trust recently asked the question — How is the virus impacting us, and more broadly, how is it impacting blockchain adoption and development across Asia and the world?
At first, this seemed a surprising question, but as global markets dive and corporates question the robustness of their supply chains it does seem sensible to question how any business is facing the challenge. So first, how is the spread of the disease impacting the growth of digital assets? Further, what has the Hex Trust remote work experience been like, and what are the lessons for firms in the US and Europe that might soon face similar adjustments?
First — for Blockchain
Hex Trust has seen no slowdown or diminution in interest for digital asset projects. Indeed, demand is growing. This is something we hear from other firms we work within the blockchain and digital asset space.
This might seem counterintuitive given the overall economic impact in China — after all, last week’s release of the official Chinese PMI figures showed the figure plummeting to a record low of 35.7.* To put this in context the previous record low of 38.8 was set in November 2008, in the midst of the global financial crisis. China’s manufacturing sector is clearly taking simultaneous hits as workers are kept out of the factories and consumers are blocked from the stores.
Yet while manufacturing suffers, blockchain enterprises are powering ahead. According to the People’s Daily, in the first two weeks of February alone developers released 20 new blockchain-based applications specifically designed to help fight the virus. The trust and surety inherent in blockchain solutions are of great value in health care provision and record keeping. The quick adoption of blockchain-based tools to help fight the epidemic will only accelerate the broader acceptance of this digital tool in all areas of the economy.
Beyond this, several firms are ramping up or accelerating blockchain-based projects that are not directly applicable to the fight against the virus but that do gain traction from it. For example, at least one Hong Kong-based company is enhancing and accelerating its blockchain-based solution that simplifies medical insurance claims. This process is not only more efficient, it comes with the benefit of not requiring large teams of people sitting together in an office, thereby further limiting the likelihood of transmission.
In other key areas blockchain projects are benefiting from the focus on health and well-being. For some time now several firms have been implementing solutions to help guarantee the validity of medicine or the safe provenance of foodstuffs. As these tools gain greater traction they can be expected to spread their reach to verify the source of nearly any valuable or important good. In a world where people are worried about their health and the availability of authentic goods, blockchain has a unique advantage over the status quo.
Cash in Hand
Further, the government has taken note that banknotes, long known to be rather dirty pieces of paper that pass from hand to hand across the breadth of a population, are possible vectors of transmission for the virus. In an unusual change from the norm, the Chinese Central Bank has issued instructions to local banks to ‘launder’ their cash.
Banknotes are to be disinfected with a combination of ultraviolet light and heat, then stored for several days before it can again be released to customers. Cash that comes from areas with particularly high rates of infection is being returned to the Central Bank where instead of mere treatment it may be destroyed.
WeChat Pay and Alipay have already made electronic payment the norm in China, and the idea that paper cash might make you sick will only drive people further towards digital purchases. As the Central Bank has been working to launch its own Central Bank Digital Currency this environment will only accelerate the adoption of digital payments and asset storage.
Production zooms along
And this greater demand comes in an environment where production is far less impacted than areas such as manufacturing. Blockchain development teams can continue to operate from anywhere that they have electricity and a secure connection to their team. Financial and legal teams can structure and place deals from backup sites just as well as they can from their main office. Creating digital currencies or STOs can continue even as society fights the virus.
Blockchain solutions are certainly not suitable for any problem, but where they are a good fit they provide an excellent additional benefit beyond their value-add. Blockchain solutions, at least well-designed, appropriate blockchain solutions, tend to require very little manual interaction. Processes are greatly automated. In the world of digital custody, for example, there is no need for teams of back-office personnel to manually handle settlement and clearing as the transactions appear onchain. As mentioned earlier, the current viral epidemic is exposing legacy processes that are slow, inefficient, and demanding of manual resources. The benefits of blockchain for asset representation and storage are now all the more apparent.
Second — for the Working Environment
The specific impact for Hex Trust is similar to that of most technology and blockchain firms. The firm faces the same challenges as are found in other sectors but is in a better position to adopt technological solutions.
Most Hong Kong companies have adopted a segregated work-from-home process to ensure that in the small chance that someone at the firm does contract the virus the entire firm will not be quarantined. Keeping certain members of the firm internally segregated at backup sites or at home avoids the small chance of an enforced total shutdown. With a stronger focus on security and communication, tech firms are typically in a much better position to do this in a thoughtful, measured fashion.
Productivity Proceeds
For those concerned about productivity it should be noted that, while there are instances where enforced separation can slow things down, overall productivity levels have remained the same. This mirrors the experience of several of Hex Trust’s team from their time at CLSA during SARS. At that time CLSA also instituted a split work-from-home policy. While there were initial fears that productivity would drop, in fact on just about any metric output stayed the same or increased. Well motivated employees work the job, not the clock, and having extra time not spent commuting only makes it easier for them to do so.
Other differences
There are other changes of course. For one thing, there are very few face-to-face meetings in Hong Kong anymore. Video conference calls have instead become the new standard for meetings. These days when offering a face-to-face meeting in Hong Kong the other party tends to be surprised.
Building management is also pushing very hard to do its part, or at least to be seen to be doing its part. Despite strong statements from a number of medical professionals, including the US Surgeon General, that standard surgical masks do nothing to prevent the virus from reaching the wearer, many buildings in Hong Kong have decided that everyone entering and leaving must wear a mask. Furthermore, they have instituted temperature checks every time someone enters, despite the fact that most evidence suggests that people can spread the virus well before they are showing symptoms. The process though does allow employees to get to know the security guards better though as they wait for their temperature reading and joke about the results. Otherwise it likely only serves to give the TSA competition for best performance in an attempt at ‘security theater.’
In short
Hong Kong appears to be on the (or at least ‘a’) downward leg for the spread of the virus just as Europe and North America are picking up. It appears that the epidemic is accelerating interest in blockchain and digital asset projects. Keep working away on your blockchain effort, but just remember to wash your hands.
*A PMI figure is calculated so that a number above 50 indicates that the manufacturing sector is expanding, and one below 50 tells of contraction. The further above or below 50, the stronger the change.
Want to learn more about Hex Trust and our custodian solutions for digital assets? Reach out: enquiries@hextrust.com
About The Author
Chris Lobello has more than 20 years of experience in Asian financial markets, in roles ranging from risk modelling to quantitative analysis to country and regional management.
As the Head of Strategy at Hex Trust, Chris drives the effort to meet customer needs by bridging blockchain technology capabilities and traditional financial systems. He serves as an adjunct professor and lecturer at several of Asia’s top business schools, teaching courses on decision making, risk management, business ethics, and of course fintech.
Chris also serves on various industry boards and committees, including several of the FTSE global advisory committees and his work as a board member for CQAsia, the Asian branch of the Chicago Quantitative Alliance. Chris earned his bachelor’s degree in physics and mathematics from Illinois Benedictine College and his MBA from INSEAD.
About Hex Trust
Hex Trust is the Asian leader in enterprise-grade custody for digital assets. Led by innovators from the institutional financial services space, Hex Trust has built a proprietary platform that delivers a modern custody solution for financial institutions, asset managers, and corporations to safely and efficiently operate in the blockchain ecosystem. ZeroKey(TM), a proprietary technology, enables seamless transacting and fast access to assets stored on multiple blockchains, while maintaining the highest levels of security of cold storage solutions. As a registered Trust Company under the Hong Kong Trust Ordinance and holding a Trust or Company Service Provider (TCSP) license under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, Hex Trust offers a truly end-to-end digital asset servicing solution. Visit www.hextrust.com to learn more.
Enquiries: media@hextrust.com
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