Cryptocurrencies are having a moment, whether it’s a digital coin inspired by the "doge" internet meme, the crypto exchange Coinbase breaking records with its initial public offering, or tech billionaires weighing in on Bitcoin futures.
But away from the headlines, it’s taken blockchain — the decentralized recordkeeping technology underlying digital currencies — more than a decade to make significant headway in consumer finance.
And according to industry experts on a recent MIT Sloan panel, there are still plenty of issues impeding the widespread adoption of blockchain.
From regulatory uncertainty to the high cost of entry, “there's a lot of stuff you have to do in order to really be a blockchain,” said Mitzi Chang, the co-chair of Goodwin Law’s Digital Currency & Blockchain Technology practice.
Blockchain companies must also think about the user experience when creating cryptocurrency, all while navigating thorny infrastructure challenges and “technical glitches,” she said.
At the MIT FinTech Conference, which was held before Coinbase’s initial public offering, Chang moderated a panel on blockchain and consumer financial technology, where she was joined by executives from Coinbase, the Global Blockchain Business Council, the digital asset bank Sygnum, and Ripple, the company behind the XRP currency and digital payment network.
Here are their thoughts on how to facilitate more consumer-friendly blockchain options.
Provide more regulatory clarity
Many companies operating in the rapidly evolving cryptocurrency space are looking for guidance on regulation.
Governments around the world have different regulations, and “even within the U.S., there are different regulatory regimes,” said Surojit Chatterjee, the chief product officer at Coinbase, the first major cryptocurrency company to list its shares on a U.S. stock exchange. “Right now, every government looks at crypto in a slightly different way, and that makes it really hard for industry players to understand global products.”
The past few years, regulators have been wading through the sector’s complexities, such as how to classify and monitor Bitcoin and other cryptocurrencies. In January, the government said it would permit stablecoins to be used for bank payments. Many hope that 2021 will provide more clarity.
Mathias Imbach, a founder of Sygnum, said there’s “much more regulatory clarity” in Switzerland, where the company is based. Switzerland passed a law earlier this year allowing tokenized securities to trade on a blockchain with the same legal standing as traditional assets.
“We have the same rules as any other bank in Switzerland,” Imbach said. “We've made significant progress in Switzerland” with “quite a bit of certainty” in money laundering rules and transfer rules — a regulatory area of concern worldwide for digital currencies.
Improve collaboration across the banking system
Although many policymakers have said they believe banks and the financial system will look vastly different in the future, retail banks have been hesitant to dip their toes into the blockchain space because of the high capital cost to switch to a new system, hesitancy to share data, and outdated infrastructure.
“Anyone who's tried to start a business in the fintech or blockchain space will tell you that finding a banking partner that's willing to work with you is very, very difficult,” said David Schwartz, chief technology officer of Ripple. “Even if you're completely transparent about everything that you're doing, they will just tell you that there's too much risk, largely because of things like regulatory uncertainty.”
Sandra Ro, CEO of the Global Blockchain Business Council, said she believes collaboration is improving, albeit slowly. Based in Switzerland, the council includes members across 76 countries and jurisdictions.
“I came from the banking sector, and I see the banks working together at levels I've never seen before,” Ro said. “This technology requiring collaboration is actually forcing lots of different stakeholders who didn't work together before to start engaging. I think we're on that path, it will just take some time.”
Bring merchants into the fold
Creating a stronger tie between shoppers and merchants could also help consumer blockchain adoption.
“There's no other deeper sort of tie for commerce,” said Alex Adelman, CEO and co-founder of Lolli, which allows shoppers to earn rewards in the form of bitcoin when they shop online at certain retailers.
Adelman said that making it as easy as possible for both the average consumer to use bitcoin and for merchants to accept it can help make crypto a part of everyday life.
Now that remittance networks — the infrastructure that allows retailers to accept bitcoin — are all set up, retailers “have no real issue with getting ready to be at a point where they can accept a bitcoin,” Adelman said.
Create a better user experience
Some experts believe that in order to truly expand blockchain with consumers, companies need to give users a seamless, easy-to-use experience.
“Crypto is like any new technology. It's still pretty hard to use. It kind of reminds you of e-commerce back in 1996 or '97. A lot of things did not work well,” said Chatterjee. “Industrywide, I think we need to do more to create ease of use and simplicity.”
So, what’s next?
Ro said the U.S. “needs to step up” and make blockchain a priority, “not just from an economic perspective” but also because “there is increasingly now a geopolitical dimension to this and a national security dimension to what's going on.”
“When you see India, when you see China with a clear blockchain strategy and messaging, it's a bit of an oddity that the U.S. has still not spoken out,” Ro said.
Meanwhile, the Federal Reserve has been working on a new digital currency, an electronic alternative to paper money, which could debut as soon as July.
“I think there are a number of outstanding questions still, and knowing how it's designed is actually going to be more important than them actually issuing it,” Ro said. “I think a well-designed U.S. dollar digital currency could put a lot of the stablecoins out of business.”