SFIG Vegas: Blockchain's complexity can cloud its utility
The first step toward getting a handle on blockchain technology is not to get bogged down in how it works.
Think instead of what it can do, experts say.
“When you look at these technologies, don’t start from the ground up, thinking, 'Oh my god, these distributed ledgers, how does all that work?'” said Lewis Cohen, a co-founder of startup legal outfit DLx Law.
Instead, “Start from the top down; what are we trying to achieve here and are these blockchains a tool set that will allow us to doing something much, much more effectively,” he said. “When you start looking at it that way, you’re going to come back and participate and be much more engaged.”
Cohen, whose practice involves companies involved in blockchain and other “disruptive” technologies, was speaking at the Structured Finance Industry Group's annual conference in Las Vegas.
Other topics raised by panelists included the longstanding promise of blockchain, such as automating the collection and distribution of current immutable data between parties through a single, non-centralized secured source.
Bernadette Kogler, co-founder and chief executive of RiskSpan, discussed multiple applications to mortgage markets – from automating the slow and methodical due diligence work on compliance regulation to redistributing credit risk on government-backed mortgage guarantees without a Freddie Mac or Fannie Mae in the picture.
“What does the GSE world look like when you think about redistribution of credit risk, with blockchain you can see a world where there are multiple entities [tied in] that can provide a government and pay that g-fee,” Kogler said.
Blockchain, or distributed ledger technology, is envisioned as a means to create a single, secured source of data and information that creates an immutable audit trail of transactions and data between parties, which improved efficiency by eliminating lag times in settlement and payments. It already has already been used in securitization.
In November, BBVA said it completed the first-ever leveraged loan syndication in Spain using its homegrown distributed ledger technology, partnering with MUFG and BNP Paribas.
In February 2017, SFIG teamed with the Chamber of Digital Commerce, a trade association promoting blockchain technology in the securitization field, to undertake research projects to speed up transaction processing and improve transparency.
In April 2017, a group of 19 institutions participated in a demonstration of a leveraged-loan syndication through a blockchain transaction on a private platform, from Synaps Loans LLC, which involved over 100 participants at 19 banks.