Is blockchain the next big thing? These Israeli fintech leaders seem to think so
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Hype vs. reality: Discussing the future of blockchain. Photo Credit: Nitzan Shiri / Deloitte

Hype vs. reality: Discussing the future of blockchain. Photo Credit: Nitzan Shiri / Deloitte

Will banks start embracing Bitcoin? According to Israeli banking and financial technology experts, could be

Despite the healthy dose of skepticism in the air, blockchain represents one of the most exciting developments in the financial sector in recent years.

While Bitcoin is unlikely to replace government-issued currencies anytime soon, the financial sector appears ready to embrace the technology behind the blockchain in hopes of achieving faster transactions with more transparency, a key factor in an untrusting and sensitive industry.

In hopes of highlighting some of the concerns and potential moving forward, Deloitte, Citi Bank, the law offices of Yigal Arnon & Co., and Bank Hapoalim sponsored a series of panels and talks on May 26, bringing together thought leaders from the fintech sector.

Blockchain startup panel Image Credit: Gabriel Avner / Geektime

Blockchain startup panel Image Credit: Gabriel Avner / Geektime

Innovation Practice Leader of Deloitte Amit Harel opened the morning’s first talk, telling the audience that, “Israel has a real chance to become a global blockchain superpower.”

Harel told the crowd that, “The technology combines some of the key areas of knowledge and experience that Israel has developed in the field of cyber,” pointing to well-trodden territories like cryptography and cyber security.

As an accountant, Harel sees numerous advantages of moving to a system with an open ledger, with hopes of easier auditing experiences for their clients. He also sees great opportunity for bringing the technology to the developing world in places like Africa where they are implementing a sort of mobile first model, essentially leap frogging over old forms of banking directly to smarter solutions.

Perhaps one of the most emphasized points of the day arose from the question of whether the implementation of blockchain will be led by private ledgers, used internally by financial institutions, as opposed to being an open to the public sort of distributed ledger.

Privacy is of course a concern, with speakers pointing out that nobody wants a case where their transactions are open for all to see publicly. For example, if all of a sudden the public ledger showed that $100 million in IBM stock was being sold, it could cause considerable panic in the market.

Instead, many of the voices at the event foresee private blockchain ledgers leading the way, wherein all the internal actors of an organization would be able to view transactions. With this model, it could theoretically make inside operations much more efficient, reducing the need for different departments to check manually what the other hand is doing, while keeping the information private.

Who will take the lead? Banks vs. startups

Whereas Bitcoin and the blockchain had previously been the purview of enthusiasts and startups, major global banks seem poised to take advantage of the technology.

In news that broke on Monday, the Spanish bank Santander announced that their UK branch employees are taking part in a pilot using Ripple Lab’s blockchain technology in what is likely a prelude to a massive rollout.

Looking at Santander’s example of using outside startups to develop the technology and implementation, this appears to be the model of how the banks, with their massive institutional baggage, are most likely to move forward on blockchain.

Bank Hapoalim’s CTO Yoav Intrator spoke with the audience about the need for what he called Market Makers and Players, saying that the banks were likely to be the players working with startups in this new sector of the industry.

He gave Geektime the impression that the banks seem ready to embrace the technology as they find their place in the new reality.

(L) Simplex CEO Nimrod Lehavi voices skepticism of banking industry's readiness for blockchain with Bank Hapoalim’s CTO Yoav Intrator listening in the front row (R) Image Credit: Gabriel Avner / Geektime

(L) Simplex CEO Nimrod Lehavi voices skepticism of banking industry’s readiness for blockchain with Bank Hapoalim’s CTO Yoav Intrator listening in the front row (R) Image Credit: Gabriel Avner / Geektime

Beyond companies like the American Ripple Labs, Israeli startups like Nimrod Lehavi’s Simplex were in attendance to talk about their role in shaping the new reality of the industry. Lehavi is skeptical of the extent to which the banks are truly ready to embrace the technology and step away from their current model.

He pointed to the the packed room at the event, noting that perhaps the organizers were surprised by such a robust interest in the topic.

He said that, “The banks accept the innovation, but they still don’t get Bitcoin and are mucking around through different kinds of terminology like distributed ledger or blockchain, trying to find a model that will fit their market. So while most banks’ innovation labs are thrilled and interested, the compliance departments are conservative as always, and uninterested in any change whatsoever.”

Lehavi told Geektime that he believes that, “Like all the great empires, it wasn’t enough that they corroded from the inside, they always needed a Genghis Khan to come from the outside to come in and demolish them. I don’t think that banks will be demolished, but I do think that there’s a huge opportunity for disruption that they are ignoring just like every other empire facing disruption.”

Blockchain’s future?

Like others in the crowd who thought that we knew what blockchain was and where it was going, I left with the event with more questions than answers.

The technology and its potential for changing the way that money changes hands cannot be overstated, and the time seems ripe to begin implementation. At the same time, regulators and the public at large are still trying to make sense of how to digest it.

Concerns regarding acceptability into the market et large aside, the caliber of those in attendance, including Advocate Roy Keidar of Yigal Arnon & Co. Law Firm and the leadership from global banking and accounting entities, lend credence to the enticement of possibility and expectation of what is to come: It doesn’t matter if they call it Bitcoin, blockchain, or another name that inspires more confidence.

What is for sure is that change is coming, and we’d better be ready for it.

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Gabriel Avner

About Gabriel Avner

Gabriel has an unhealthy obsession with new messaging apps, social media and pretty much anything coming out of Apple. An experienced security and conflict consultant, he has written for The Diplomatic Club, the Marine War College, and covers military affairs with TLV1 radio. He mostly enjoys reading articles wherever his ADD leads him to and training Brazilian Jiu Jitsu. EEED 44D4 B8F4 24BE F77E 2DEA 0243 CBD1 3F7C F4B6

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