PwC “optimistic” about UK Blockchain legislation; “superficial understanding” needs to be addressed
Steve Davies, the global lead for Blockchain at Price Waterhouse Cooper (PwC), has told CryptoNewsReview that he is generally positive about the prospects for regulation in the UK blockchain industry.
Interviewed after his presentation at Blockchain Live, which lent heavily on PwC’s research into Blockchain adoption and was aptly titled Overcoming Blockchain’s Trust Problem, Steve Davies – Global Blockchain Lead at professional services and auditing giant Price Waterhouse Cooper – said that for the majority of businesses he deals with “there’s so much energy and talk around blockchain it’s hard to not be aware of it.”
However, he believes that a lot of “superficial understanding”, and the conflation of cryptocurrencies with the potential use-cases for blockchain-based technology, means many – including regulators – “start in a difficult place” when it comes to their attitudes.
One of the headlines of PwC’s recent research into the Blockchain sector told them that 84% of companies that responded to its questions have embarked on Blockchain projects – however Davies thinks that “it’s very easy to create a superficial understanding, conflate the whole cryptocurrency thing, and that’s sort of what’s happened,” leading to problems in convincing the wider interested parties within any company of the potential such projects present.
“I look across different industries – energy, pharma, healthcare, financial services, retail, manufacturing – and most organisations are worried about innovation and disruption,” he adds. “It’s very quick to get from that to ‘we need to understand blockchain’, but then the issue is what do they do after that?”
“That’s where I think a lot of it has become stuck,” he says, regarding why PwC’s survey concluded only 15% of all projects started are now operational in their instigator’s businesses. Doubts around regulation appears to be the major hurdle stopping greater adoption, however, with 48% of respondents citing it as an issue. Another issue intrinsically tied to that – user trust in the technology – comes in a close second however at 45%.
“I think we have to be careful with some of the language that gets used,” Davies notes. “We have a regulatory community inside PwC, and there is sometimes an instinctive reaction that this is not a good thing, and that’s a hard place from which to start having a conversation.”
He believes it’s important, therefore, that those talking about the space to stress the simple fact that “blockchain does not equal Bitcoin.”
As was observed by the BBA in recent comments, “You have to sort of break them out,” Davies insists.
“And even then,” he adds, “there is a view that blockchain is a single technology and ‘it’s all distributed, it means that there are no central actors, and that it has to be done in a certain way’. That’s not true, there are many, many ways you can do this… I think there’s a lot of people in the regulatory community who are like that, and that’s been a challenge.”
“I know that they want to do the right thing,” he says, “and they’ve got to take their community with them.”
This is why he believes it has “taken so long” to get to where we are currently, waiting for the Treasury Cryptoasset Taskforce to report its findings – something that could possibly happen in early October. Interestingly, though, rather than just lamenting the problems lack of regulation has bought the sector, Davies sees this as a valuable lesson going forward.
“We’re going to see technologies burst out, and create some real challenges for regulatory constructs, and regulators have to move quicker,” he adds. “That’s got to be the lesson.”
Generally, though, Davies says the UK govt. will get its act together going forward.
“I’m optimistic,” he says of upcoming announcements and policy direction.
“I think what we’ll get is a discussion document that sets out a series of principles and observations, and from there we can start to see a pathway towards what is going to be regulated and what is not – and what that regulation will look like. Not all that we do in blockchain for enterprise and infrastructure needs new rule books.
“It’s specifically in the crypto space where it is important.”
The Impact of ICOs on Blockchain
Regarding whether the ICO model in general has been beneficial to the development and perception of Blockchain tech or not, Davies’ response is mixed: “I think it’s a net positive at this point,” but also “time will tell.”
The problem has been the speed of the innovation, he thinks.
“It’s a pity that it’s happened so quickly that regulators haven’t had a chance to coalesce their views and tell us what they like and don’t like about the space,” is his first observation.
That speed of development has meant that “different organisations involved in that space have had to make their own mind up and make their own adjustments around what they need to do from a regulatory compliance perspective – so you’re sort of looking forward and trying to predict.”
“Some organisations have done that very diligently, some less so,” he concludes.
He then adds that “ICOs have grown so quickly, and then the air’s come out of the tyres so quickly, that there is a lot of negativity around them,” and that has “informed regulators and central banker’s views around Blockchain overall.”
However, Davies also feels that “the ICO space has shown the power of tokenisation, and created a huge amount of investment where – even if some of its gone to nefarious purposes – at least some of its gone into really accelerating that technology, which it has been a huge shot in the arm for accelerating [work on] issues around scalability, security, different types of platform functionality.”
In terms of how the ICO model has effected the pool of talent available to larger companies looking to move into the blockchain space, Davies views somewhat echo those of former RBS blockchain lead, Richard Crook, who recently said that ICOs made it “really, really, difficult to find good talent.”
“Even without ICOs it’s hard to attract really good strong talent to stay in an organisation and create value over a medium-to-long-term period,” Davies observes. However, that phenomenon “started, for me, with FinTech as much as it did with Blockchain or ICOs.”
“Many people want to go out and make a fast buck, and create the next big thing and sell it,” he says. “And even if there’s a 98% fail rate, the weight of probability sum that people are doing in their heads is that ‘if I’m in the 2%, I could become a billionaire so it’s worth doing; I’ll have a bit of fun, and I’ve nothing to lose.’”
There are, however, other forces at play in the hunt for talent, Davies insists, one of which is the demands of ICO investors:
“What’s also happening specific to ICOs is you get lot of people being drawn in work with an ICO. Because, if you want to do an ICO you need technical specialists in-house, and people will look at your white paper and look at your team and say, ‘who in this team actually knows what they’re doing in terms of blockchain?’
“So that means that if you are in the space, you have to attract the talent, so you’ve just created a whole new demand set for that group.”
The Future of Blockchain Tech
Asked if he feels Blockchain usage will explode in the next year or so, he is also guarded.
“Maybe…”, he muses. “I don’t think it’s an issue with the tech. I think it’s an issue with adoption and trust.”
“To get four or five banks around in a room, to get them to agree a common infrastructure and consensus model for a new payment mechanism is fiendishly difficult,” he notes. “They’re trying to do the right thing, but they all have their own issues and appetites for risk.”
However, looking beyond the work of the big banks and institutions like his trying to get into the space, Davies sees a second wave on disruption on the horizon, that will reject many of the companies his research polled.
“The longer term wave,” he predicts, “is that a lot of people are in blockchain to see it’s disruptive impact in a positive way.”
What this means is that “if blockchain becomes another technology for established market participants to do their thing”, there will be a pushback.
“I don’t think that’s what people were in it for,” he says, “I think they are in it to create new ecosystems.”
There are, he predicts, “people who are looking to not just do the thing that we do today better using blockchain, but do it in a completely different way. We’ll all look at it and go ‘Oh my God, that’s just so obvious’ – but now, we just can’t see it. But I think those things are coming over the next few years, not just the next year.”