Blockchain benefits are oversold – Boston Consulting Group

August 16, 2018
Chris Wheal

A new report from Boston Consulting Group (BCG) claims the rising number of blockchain pilot schemes undertaken by banks may yield less fruit than thought. BCG claims some benefits have been over-hyped.

Analyst Antti Belt says blockchain’s tech potential to transparently record complex transactions, track goods, and cut fraud “could prompt industry players to find even better ways to solve commodity trading’s poor standardization and transparency”.

Are the banks being over-sold on blockchain tech? BCG thinks they may be

Not so fast

Whether blockchain is the killer app is a huge question she says. Belt says there’s concern over blockchain’s vaunted transparency and whether it would lead to fairer prices.

“It would impact the profits of traders that rely on pricing inefficiencies to make money. Price-reporting agencies would also need to find new ways to expand their businesses.”

Clearing house worry

Considerable risk – if a counterparty defaults, for example – exists in the clearing of bank trades she warns and in the physical delivery of goods (fraud and poor quality).

Real-time settlement anxiety is…real

While enabling settlement in nearly real time, blockchain largely eliminates clearing risk and diminishes the role of clearing-house, Belt acknowledges. But there’s a drawback.

“Financial market players have struggled to close the gap between transaction dates and settlement dates. And real-time settlement would be bad for some counterparties because they would have to release collateral early.”

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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