British regulators catch breath amid Bitcoin slump

28 November 2018 Consultancy.uk

A crash in the value of Bitcoin has bought UK regulators precious time to examine the market before deciding on a plan of action. Bitcoin’s value has collapsed to $4,500 per unit, having been riding at an all-time high near to $20,000 as recently as December 2017.

In an age of rapid technological advancement, regulators have been thrown into turmoil as to how best adapt their operations to continue monitoring their respective industries. While it has almost always been the case that laws play catch-up to innovation during periods of change, however, when it comes to cryptocurrency and its related technologies, regulators have been caught particularly flat-footed.

In a recent poll of executives by PwC, 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. This is also the case with the financial world’s adaptation to the meteoric rise of cryptocurrency Bitcoin.

As recently as 2013, it was thought to be remarkable that Bitcoin’s value had exceeded the $1,000 dollar mark. By December 2017, the notoriously volatile currency’s worth had ballooned to $19,783. The record run lifted the trading of Bitcoin to major prominence among investors, but also prompted regulators and central bankers around the world to take a closer look at the sector.

British regulators catch breath amid Bitcoin slump

The process of regulating the borderless trading mechanism proved extremely difficult, however. So far, global regulatory bodies have been unable to reach a consensus on rule changes and have instead opted to monitor the sector closely for the time being. Britain, alongside the international community, still faces a conundrum of how to balance an innovative economy with maintaining consumer protection, stable markets and thwarting financial crime; the rapid growth of the bitcoin market had led to pressure mounting on regulators to act quickly.

Fortunately for them at least, some of this pressure has now been lifted, with Bitcoin prices nose-diving over the course of 2018. While some of the cryptocurrency’s critics have suggested this is the bursting of the bubble they have long prophesised, Bitcoin boosters still expect digital currency to rebound. In the interim, though, regulators will have some much needed elbow-room to work on catching up with the market.

According to a recent Reuters article, a fall in the value of cryptoassets over the past year as investors lose interest, and a drop in Bitcoin, which now rests at below $4,500, has eased the pressure to issue tough new rules. British regulators and government officials reportedly told a City & Financial conference they were focused on how 2,000 or more cryptoassets slot into existing rules before considering reforms.

Speaking at the event, Gillian Dorner, Deputy Director for Financial Services at Britain’s Finance Ministry, said, “We want to take the time to look at that in a bit more depth and make sure we take a proportionate approach.”

Christopher Woolard, Executive Director for Strategy and Competition at the Financial Conduct Authority, meanwhile added that there is a need to clarify “grey edges” around the existing regulatory perimeter. Stating that the FCA will consult by the end of this year on where the perimeter lies for cryptoassets, he explained, “This will help clarify which cryptoassets fall within the FCA’s existing regulatory perimeter, and those cryptoassets that fall outside.”

After this point, the Finance Ministry will consult on whether the perimeter itself needed shifting. This follows the news in October that a task force of the Finance Ministry, FCA and Bank of England had recommended a ban on the sale to retail customers of derivatives products linked to cryptoassets.

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How blockchain can drive transportation and logistics forward

04 April 2019 Consultancy.uk

The much-hyped innovation of blockchain has been said to have myriad possibilities, as companies across the industrial spectrum seek to safeguard their supply chains and increase efficiency. A new survey has found that it can drive transportation and logistics forward, bringing rise to several benefits, including addition transparency in its value chain, financial improvements, and better customer alignment.

While blockchain technology’s applications have long been speculated about thanks to the growing prevalence of cryptocurrencies, it is now a very real mechanism used by businesses worldwide to implement powerful solutions to some of commerce’s most pressing problems. Early experimentation with variations of blockchain technology proved most fruitful in the financial sphere, but it has also proven extremely useful in supply chain management and logistics.

A blockchain is a shared digital ledger which can be used to record and store transactions between multiple participants in a network. Changes made to the blockchain record must be approved by participants through an automated process. As a result of the fact information cannot be deleted, only appended, a blockchain provides an evidentiary trail of information back to the point of origin, meaning companies can locate and prevent fraudulent activity in their supply chain, should they leverage the tech adequately.

In September and October 2018, Boston Consulting Group conducted an online survey of global companies in the transport and logistics (T&L) industry in  order to assess their understanding of blockchain and their progress in adopting the technology. Despite the promises of the technology, however, BCG’s survey of executives from more than 100 T&L companies found that most industry participants have not taken a deep look at blockchain’s potential applications.

How blockchain can drive transportation and logistics forward

Commenting on why uptake may still be slow, report co-author Jacqueline Govers, a Partner at BCG in Amsterdam, said, “Many T&L executives regard blockchain technology as at best mysterious or at worst ripe for exploitation. In fact, the underlying concept is fairly straightforward. Simply put, because blockchains create data transparency, they help to establish trust among participants in complex networks... Blockchain can help the [transport and logistics] industry address these pain points by providing an immutable shared data repository, promoting trust among participants, and enabling automation of repetitive processes.”

A wide variety of pain points impede information sharing and create costly inefficiencies for modern T&L firms. In order to encourage more firms to tap into blockchain’s potential, BCG identified nine areas which can be aided by the technology.

Inefficient data and document management is possibly the most costly of these pain points. In the age of big data, leveraging blockchain to make the most of a company’s data could open up major untapped revenue opportunities. At the same time, blockchain can help with regulatory compliance efforts, helping secure supply chains at a time when laws firms can be stung by huge fines when failing to safeguard their data. It also goes without saying, then, that blockchain can help prevent the direct impacts of trade-based money laundering and fraud as well.

Efficiency savings

Further increasing efficiency in the industry, according to BCG, suboptimal equipment utilisation can also be tackled, while blockchain negates the need for a cumbersome letter-of-credit process, thanks to the digitalisation of the supply chain. Non-transparent pricing and booking can also be avoided, meaning it is easier for members of a value chain to get a fairer deal for their efforts, and avoid being exploited. 

BCG also asserted that blockchain’s rapid and efficient mechanisms mean that complex claims and changes in ownership can more rapidly be resolved, avoiding more lengthy back-and-forths between different suppliers. T&L executives can also use blockchain to reduce the cumbersome methods of traceability in their supply chains, though BCG warned that to make this happen, T&L companies must start to establish trust as the foundation of a collaborative blockchain ecosystem. Finally, T&L firms could use blockchain to improve on complex processes of reverse logistics, since a blockchain provides an evidentiary trail of information which can rapidly be used to work back to the point of origin.

Govers concluded, “With some T&L companies taking the first steps toward forming a blockchain ecosystem, other companies must decide whether to participate or adopt a wait-and-see attitude. In our view, the benefits of being among the first to join these collaborative efforts far outweigh any advantages of a cautious approach... As customers increasingly demand higher levels of trust, security, and automation, no T&L company can afford to remain on the side-lines while its competitors seek to resolve the blockchain paradox.”