Over the past few years many of us have heard the sound of a consistent level of dialogue revolving around the topic of blockchains, distributed ledgers and digital assets. And of course, to date, we know one of the most renowned actors in the space of this technology has been Bitcoin. However, in the last six months a new bonfire of conversation has ignited, relating to the conjecture of the modification and application of the technology to revolutionize the world’s financial systems.
The sound of this dialogue which we’ve been observing to date, is rapidly changing from a normal conversational tone to the amplitude of a roar. In the past four months, we’ve been invited twice to speak at the BNY Mellon Innovation Center in Silicon Valley. BNY is the largest custodian of assets in the world – over $20 trillion dollars. Let’s let that sink in for a second. How big is a trillion? Well, one trillion seconds ago – it was approximately 115,000,000 BC. Yes, that’s 115 hundred-million years ago. Multiply that by another 20 and we’re talking about a planet Earth that is around 10 times older than when there were dinosaurs. That’s how large a number we’re talking about on a quantitative scale in relation to the value of assets BNY keeps on deposit.
So what are we talking about at BNY Mellon? Well, for the majority of the modern era, the world’s financial transactions have been kept on paper. This is true even as we travel back in time hundreds of years. It’s only been during the last 25 years that we’ve seen transactions start to become digitized. Even so, with this digitization, it still takes transactions a number of days to settle. This is because even though there are digital components to this process, there is no unified platform for which all of it can take place. When one institution transfers an asset to another institution, there are back offices (and often times intermediaries, with their own back offices) that each must document the process and settlement of each step of the way. Even though they all have their electronic systems, each one is independent and unique, this is why it takes days.
Blockchains and distributed ledgers have the potential to revolutionize our financial systems because they provide a common intersection for all parties involved to automatically exchange assets. This in turn allows the potential for all transactions to happen within a day, and in some cases, almost instantaneously, about at the same speed with which it takes someone in New York to open a website in Tokyo.
Recently we had the privilege of talking about this in more detail on a panel in front of an audience at BNY, alongside Chain and Timothy Swanson, fellow pioneers who are also working together in this very medium which we refer to and share.
So what can we learn from this? For starters, it’s not a matter of if blockchain technology or distributed ledgers become the standard of exchange amongst institutions – it’s when. Not only now are the largest financial groups – BNY for example – actively researching the application of the technology in the space, some of the “Big 4” accounting firms are, too.
And that, is exactly where Libra comes in. To date, we remain the primary platform in the space for accounting, reporting and providing tax compliance support for these digital assets leveraging block chains and distributed ledgers.