DAVOS 2023: Blockchain’s Potential Beyond Cryptos

DAVOS 2023: At #WEF23, policymakers and business leaders were eager to distinguish between distributed ledgers and cryptocurrencies. Not crypto, but blockchain.

From climate solutions to humanitarian aid to moving on from FTX’s stunning collapse, the second day of the World Economic Forum’s 2023 annual conference saw discussions focused on the promise of the technology underlying cryptocurrencies, rather than the often speculative financial assets themselves.

The day opened with a panel of traditional banking professionals seeking to draw a line under the FTX issue, noting that, while the cryptocurrency industry is in crisis, other products founded on distributed ledger technology are not.

“It’s critical not to mix cryptocurrencies with CBDCs, stablecoins, and DLT… they’re all quite distinct,” PayPal President and CEO Dan Schulman stated. Despite the bitcoin crisis, “the underlying tech has operated well,” according to Schulman.

“The promise of a distributed ledger is that it may be faster and cheaper to settle transactions concurrently with no middlemen. That is really significant.”

Importantly, unlike past waves of “blockchain, not bitcoin,” which generally referred to permissioned blockchains, the talks on Tuesday were OK with public ledgers such as Ethereum and the Stellar network. Lynn Martin, President of the New York Stock Exchange, seems to adopt a similar stance, citing the potential benefits of blockchain in making share issuance more efficient or allowing financial exchanges to be settled quickly rather than days later.

“Some of the technologies have now been embraced and used to truly make processes considerably more efficient,” Martin added.

Former Indian central bank governor Raghuram Rajan later repeated that promise of broader blockchain uses.

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However, TradFi’s commitment to the industry may eventually be tested: When questioned, Schulman, Martin, and State Street’s Ronald O’Hanley all claimed artificial intelligence, not blockchain, was the most exciting technology.

Carmen Hutt, treasurer for the United Nations High Commissioner for Refugees, detailed such an application – a recently launched blockchain payment solution for distributing humanitarian aid in Ukraine – just across the street from the forum’s main congress center, in a historic church transformed into a neon hub for hosting discussions about the future.

Hutt revealed during a panel discussion hosted by CoinDesk chief content officer Michael Casey that the pilot project, which was launched in December using the blockchain platform Stellar network, is significantly more sophisticated than one might assume.

Donations via the blockchain promise “transparency and visibility,” and the Commission has a platform ready to send relief immediately, according to Hutt. “What an incredible offer… We can deploy $500 million today if we acquire $500 million. So this isn’t going to take weeks or months,” Hutt explained. (Later that day, Ukraine’s deputy prime minister praised the contribution of virtual money to the military effort.)

Further along the legendary “promenade,” industry heavyweights ranging from Solana and Ripple to the Global Blockchain Business Council teamed together to develop a climate project that would use blockchain’s transparent record-keeping to assist in improving carbon emissions and credit tracking.

Although authorities have mostly focused on the potential of crypto contagion to financial stability, a string of bankruptcies last year that wiped out billions of dollars in retail investments, most notably Sam Bankman-FTX, Fried’s may have underlined the need for a shift in their focus.

For the lone banker on the conventional finance panel, the events of 2022 must shift regulators’ focus away from the risk of lenders bringing down the whole financial system and toward the risk of individual customers being duped by crypto frauds. “It’s not that regulators have disregarded [financial innovations], but if it’s not going to generate systemic danger, I’m not sure why we should focus on it.”

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