Money 20/20 Highlights: Blythe Masters, Blockchain Innovation

At the Money 20/20 Conference in Copenhagen last week, both Bitcoin and particularly the Blockchain were discussed widely.  The conversation has shifted vastly over the past 3 years, as established financial players are actively looking towards Blockchain technology to benefit their businesses.  There were 4 Bitcoin centric presentations, and the following article summarizes them as follows.
Also read: Bitcoin Taxes 2016: Accurately Reporting Bitcoin Usage
On Wednesday morning, banking super star Blythe Masters, formerly of JP Morgan and now CEO of Digital Asset Holdings, delivered an evangelistic speech which hailed the justified business benefits of blockchain technology and its future in banking, even amongst the largest financial institutions.  One of the Keynote speeches at Money20/20 Europe, Ms. Masters captivated the audience and stimulated an excitement for the seemingly inevitable implementation of blockchain-like technology into Wall Street. The entire day, Blockchain was a hot topic as executives from large banks and payments companies were curiously and attentively listening to the discussion around the blockchain that was kickstarted through Ms. Master’s enthralling and insightful talk.
One notion that will be scoffed at in Bitcoin circles, however, was that Ms. Masters talk generally discredited the work that Bitcoin has already provided in learning about distributed payments systems, and also did not mention the necessity to have an inventive token or fully independent miners managing these operations. Instead, Ms. Masters focused on the potential benefits of shared financial infrastructure for large banks provided through implementing a Blockchain equivalent as a means towards improving the existing, globally compartmentalized financial backbones. Ms. Master’s talk provided a unique and valuable window into the ways through which Wall Street is viewing the potential of Blockchain technology.
On Unlearning From Bitcoin and the Future of Blockchain Technology
Throughout her talk, Ms. Masters pronounced the benefits of shared database infrastructure across financial institutions, yet generally downplayed the connection of Blockchains to Cryptocurrencies and incentive tokens for miners.  Large banks are definitely looking into distributed ledger technology, but having shared financial architecture across banking institutions, who will potentially own or solely monitor the nodes in the network, does not necessarily mean that the database architecture qualifies as a “blockchain”.  Speaking to the topic of Bitcoin versus the Blockchain, Ms. Masters remarked:
Ms. Masters: “Everyone has heard enough about Bitcoin, cryptocurrencies, and Blockchains to have been confused in at least one dimension as to what this is all about. And therefore, when asked to explain this space, I often ask people to forget pretty much everything you’ve heard about blockchains, crypto-currencies, and bitcoin, and instead dumb it down a lot and think about something no more complex or intimidating than good, old-fashioned database technology… But when people realized or were able to distinguish between those two topics, and realized that many features of the public Bitcoin Blockchain are not a necessary feature, or are essentially technology specs that can be changed for use in different context, then this just becomes a discussion about enterprise technology.”
When asked about the separation of Bitcoin and a Blockchain in the following panel, Bobby Lee of BTCC said, “To me, it’s always linked at the hip.  You can’t have Bitcoin without a Blockchain.  Nor can you have the true, functioning blockchain without Bitcoin. So for the people out there trying to have a Blockchain without Bitcoin, that’s not realistic.”
On Working With Regulators and the Timeline to Integrate Blockchain into Banks
Blockchain’s implementation into banking seems inevitable, as the overhead required to monitor the flow of financial instruments across compartmentalized infrastructure is weighing down bank’s profit margins. Recognizing the business benefits of lowered costs, increasingly secure data maintenance, and shortened latency times, banks are keen to realize the benefits of shared, mutualized databases.  Ms. Masters remarked that “The timeframe it (Blockchain) will take to get to be mainstream is more like 5-10 years.”  Banks are working with the regulators to ensure that blockchain technology is implemented in a legally compliant way that will meet existing KYC and AML regulations. As Ms. Masters remarked:
Ms. Masters: “Now, bear in mind the regulators are already armed with a tremendous amount of power when it comes to sensitive market infrastructures. If you want to operate a sensitive market infrastructure, you are by definition a heavily regulated entity, and you have to answer to your regulators, obvious questions. Do you have the backup, the capacity, the resiliency, the redundancy, and all of the other features that you need if you want to be in that line of business, and if you don’t, you shall not be in that line of business, it’s pretty straightforward. So the ability that regulators have to control the development of technological infrastructures in the space is well established. It doesn’t require the re-invention of the law. It means that those like ourselves (Digital Asset Holdings) who are working on the technology need to be able to answer these sorts of questions satisfactorily.”
Do Regulators Have Increased Awareness Now?
Regulators around the world are much more aware of Blockchain technology and Bitcoin than the general public, and are working to research it and understand it actively. It is not a joke when people say that Bitcoin and the Blockchain are the most impactful invention since the Internet.
Ms. Masters: “They are many regulators who are publicly pronounced on the subject not unambiguously endorsing the concept, they are acknowledging that there are potential benefits. That if responsibly pursued, could be of great interest to them. Regulators absolutely, no question have more awareness and insight of this. ASIC (Australia), Bank of England, Federal Reserve, they are acknowledging that there are potential benefits that if responsibly pursued could be of great interest to them.”
On Creating Common Standards
Discussing the ongoing work of the Hyperledger project, Ms. Masters shared her optimism around progress in development.  While there are no details around how this new platform will offer an incentive token, who will control the miners and how mining power will be distributed, plans to enable blockchain scaling, off-chain or lightning network implementations, or governance procedures, there are significant resources being put into the ongoing efforts.
Ms. Masters: “Common standards are being discussed. But perhaps more importantly, the creation under the auspices of the Linux Foundation,