Trust and regulatory uncertainty are top barriers to blockchain adoption
While more than eight in every 10 business and technology executives around the world have blockchain initiatives underway, only one in four of these say their organisation now has a fully live blockchain implementation or pilot underway. According to a new study, while blockchain boast a number of clear gains, regulatory uncertainty and trust remain the biggest barriers to wider business adoption.
Having come to prominence as the technology underpinning Bitcoin, blockchain initially made its presence felt in the financial sector. It has since made waves in the freight and logistics industry, while clients in every sector from insurance to retail are pressing their consultants for advice on how to exploit, or defend themselves, from its disruptive impact. Now, a report from PwC has seen some 600 executives in 15 territories, including 41 in the UK, polled on their development of blockchain and views on its potential.
According to the research, the early dominance of financial services developments in blockchain are still being felt, with 46% of respondents identifying it as being the leading sector in the coming three to five years. In the same timeframe, a number of sectors were identified by respondents as holding emerging potential within the blockchain arena, though. These include energy and utilities, rated by 14% as an up-and-coming space, alongside healthcare on the same proportion, and industrial manufacturing at 12%.
In terms of where blockchain has gained the most solid foothold, meanwhile, the results will likely be of little surprise. Early adopters of the US and China are perceived as the most advanced users of blockchain at present, with 29% and 18% of respondents respectively naming the two superpowers as leaders in the market. Looking ahead, the same two are still expected to dominate, however within three to five years, respondents also ventured that the centre of influence and activity will shift to China, with 30% expecting to overtake the US. Those who expect the US to retain its status as top-dog totaled 18%.
Elsewhere, the UK ranked at the bottom of a pack of six other nations vying for leadership in the blockchain scene. At present, only 5% of those polled believe it holds a leading position, and regarding the next five years, this falls to just 2%. In the same period, Australia (8%), India (6%), Denmark (5%), Hong Kong (5%) and Japan (4%) are anticipated to pull away from the UK in terms of maturity. However, while blockchain maturity is expected to advance in the future, the road to success is by no means a straight-shot, with multiple barriers still preventing global businesses getting the best from their adoption efforts.
Blocking blockchain
While a majority of 84% told the Big Four firm that they had blockchain initiatives underway, however, just 25% confirmed they possessed fully live blockchain implementations or pilot projects running. A further over half were still in development or research stages, with 7% paused, and a surprising 14% admitting to having no blockchain involvement yet. This, in spite of the fact that the majority of these professionals will be more than aware of the various benefits often discussed in relation to blockchain, including major security and efficiency savings.
So what is blocking the adoption of blockchain? According to PwC’s conclusions, regulatory uncertainty and trust still remain the biggest barriers to wider business adoption of the potentially revolutionary technology.
48% of participants cited regulatory uncertainty as a top three barrier to their blockchain efforts. Of those, 27% listed it as a top level concern, as they remain unsure of how a rapidly shifting regulatory scene for the new technology might change, or even scupper its effectiveness in the future. At the same time, in a narrow second, 45% lack of trust among users of blockchain remains a major hurdle, despite being more in the hands of companies themselves to alter. 25% state this is the biggest barrier they face for the adoption of blockchain.
Steve Davies, PwC’s leader for blockchain, commented on the results, “Blockchain by its very definition should engender trust. But in reality, companies confront trust issues at nearly every turn. Creating and implementing blockchain to maximise its potential is not an IT project. It’s a transformation of business models, roles, and processes. It needs a clear business case and an ecosystem to support it… The benefits can be compelling, if organisations understand what their end game is in using the technology, and match that to their design.”
To this end, PwC’s researchers suggest four key areas which organisations can concentrate upon to improve their first steps into exploring blockchain, and developing either internal or industry-wide platforms. Firstly, the analysts suggest, in line with what Davies suggested, that organisations must make the business case clear. Organisations can start small, but they need to set out clearly the purpose of the initiative so other participants can identify and align around it.
Secondly, by building an ecosystem, participants can improve their chances of success, by coming together from different companies in an industry to work on a common set of rules to govern blockchains. Of the 15% of survey respondents who already had live applications, 88% were either leaders or active members of a blockchain consortium. Firms should also design deliberately around what users can see and do, improving chances of success by setting out clear rules and standards for access permissions. Involving risk professionals including legal, compliance, cybersecurity from the start can subsequently ensure blockchain frameworks that regulators and users can trust.
Finally, in regard to nerves regarding regulatory uncertainty, PwC suggested companies would be better off playing a more pro-active role in regulation, rather than simply watching and waiting. By doing this, companies can help shape how the environment evolves, and minimise disruptive changes.
