Deloitte Blockchain Chief: Bad Crypto titles are making customers "nervous"


"Can we stop talking about my bad brother?"

This is how Linda Pawczuk, leader of the blockchain group in the financial services sector of Deloitte Consulting, describes the conversations she often has in recent days with executives and members of the board of client companies.

The Pawczuk team is focused on helping decades-old global companies understand how to use distributed ledger technology (DLP) to transform their paper-based business processes to a digital age. But recently, he said, these customers asked about the wildest side of the blockchain they read about the news: initial coin offerings (ICOs) that have suffered from the Securities and Exchange Commission, for example, or the illicit uses of bitcoins and other cryptocurrencies.

He told CoinDesk:

"The commissions are asking us why it's in the news for bad actors, and the commissions are nervous that the blockchain is affiliated with bitcoins and altcoins and ICOs, and what do the cards do to protect their investors?" So it did not help us. Association with the bad actors ".

Pawczuk ironically added that his Deloitte team sometimes refers to ICOs as "the donor market", which means investors will not recover their money.

While it is positive that regulators are collapsing, he said, the hype creates a distraction.

"Unfortunately, we have got those things that create anguish," continued Pawczuk. "I'm invited to meetings all the time, and I have to explain why they should not worry about information security [on a blockchain], explains what is the perspective on bitcoin and the 2000 altcoin – and we're explaining it, but we're like, "Can we stop talking about my bad brother? Can we start talking about my brother who is the Olympic champion? "

That Olympic champion, in his analogy, is DLT.

In a wide-ranging interview, Pawczuk, who hired his team at Deloitte in April after predecessor Eric Piscini left to form a blockchain startup, shared his perspectives on what kind of consortia work best to convince companies to adopt this technology; because it is nauseating by sellers who offer free proof of concept; because Deloitte is not doing any work in the hot stablecoin sector; and if he sees public chains playing any role in business.

Which consortia work

Taking a step back, Pawczuk spends most of his time working with what he calls "digital shift" – businesses that "have existed for hundreds of years, some of them, but have grown into traditional process models and have decided to migrate towards more distributed technologies "".

To rally such companies around DLT, according to Pawczuk, it is better to use a consortium that has already built a reputation as a neutral party for many years, not one created specifically to develop and promote a technical platform.

He has a ready example: The Institutes RickBlock Alliance, whose training Pawczuk oversaw his previous work, when he led Deloitte's blockchain efforts in the insurance industry for three years. In this case, the focal point was the Institutes, a group of the insurance industry active for over a century.

"The Institutes have served the property and casualty insurance industry for many decades, are nonprofit and are a very trustworthy entity.You do not have to build trust and you already have members," said Pawczuk.

Using The Institutes to create RiskBlock, it was easy to enroll 30 insurance companies as members, he said. The blockchain is in production and now the alliance is expanding beyond North America.

These structures, Pawczuk claimed, have an advantage because unlike Hyperledger or R3, they are not invested in pushing a particular technology.

"Hyperledger has a horse in the race, it's a platform, R3 is trying to bring together different parts and get them to agree on something just for the blockchain.There are comedies in the consortium where the trusted part already exists, as opposed to producing a part trusted for the sole purpose of the transaction. "

Does this mean that, for example, SWIFT, the international financial messaging service in circulation since the 1970s, would be an ideal vehicle for organizing a blockchain used by banks and companies?

"Maybe," said Pawczuk. "They are already the intermediary, they are already providing the abundance of the required capacity, including a set of standards, that the industries have already come together to be agreed."

To be honest, RiskBlock uses the R3 Rope platform – but, according to Pawczuk, the project has been blocked by the blockchain since the start and has placed insurers as the top priority.

A consortium should not be interested in getting profits from its membership, Pawczuk said. "When a consortium or influencer is forming, they are looking for ways to monetize the data, to monetize the service.You can not be a neutral party and also focus on an economic model that is selfish.It simply replaces an intermediary with another intermediary. "

Free stuff

For similar reasons, Pawczuk is skeptical about the practice among some corporate blockchain providers to build proof of concept for free.

"The most interesting story here is not the technology, it's the breakdown of the business model and how we look differently to the paradigms," he said. "So we're a little sick when we hear about all these free concept demonstrations that have been built, because it's the technology that's applied to the solution."

Rather, business requirements should determine the technology.

"If you're building free concept demonstrations, but you're missing the business environment around, like regulation, AML / KYC, taxes and all the other stuff, you're not really assisting the client holistically," Pawczuk continued. without naming names. "Another thing that makes me nervous are the demonstrations of concepts built by students who have never had to coexist in the environment where there are systems of large volumes of transactions, Blockchain does not replace all the basic systems."

When asked about the recent tendency to create stablecoins, or cryptocurrencies designed to maintain parity with the fiat, Pawczuk said that Deloitte is not doing any work in the area, and did not seem interested in pursuing it. (At least one of its competitors among the Big Four, PwC, is advising two separate stablecoin projects).

But stablecoine is not an opportunity for companies whose core competence is auditing, since these assets are typically backed by a fiat in a bank account and investors would like to be sure that the money is there. ?

Pacwczuk replied that it is too early to go there without regulatory clarity.

"Auditors will follow regulatory authorities," he said. "And regulators are moving at a respectable pace, because now we have to understand something that we have never faced before: the auditability of decentralized systems".

Public and private

But even if Deloitte is not pursuing stablecoin projects, it does not mean that its core business is moving away from the crypt. It is said that the company performs system checks and organization controls (SOC) for a number of encryption solutions.

Moreover, while Deloitte's blockchain consulting mainly concerns authorized blockchains, rather than the open type that powers cryptocurrencies, Pawczuk believes that eventually industries will need a hybrid of both.

"Let's have a look at the insurance model," he said as an example. "Let's say you and I are in a car accident, and you have a courier, I have another courier, and the couriers can settle, but what about that other guy called a body shop? blockchain authorized, because there are thousands of body shops, but it could be on the public network? So now you have a hybrid structure. "

The key to such a structure will be to make sure that these systems can talk to each other. "I'm less worried about the current DLT level, I'm more concerned about the interoperable system level, because there's the whole set of services and middleware that make this whole feature," said Pawczuk.

Another competitor, Accenture, has recently announced a so-called "interoperability node", designed to connect the main business blockchains: R3 Corda; Hyperledger fabric; Quorum, developed by the global JPMorgan Chase bank; and Digital Asset. But Deloitte highlighted its blockchain interoperability request, linking data from the commercial finance blockchain, as demonstrated in May at the 2018 Consensus.

And despite the distractions created by the crypto turbulence, Pawczuk gave credit to the predecessor of all the blockchain systems that have been built now, concluding:

"The fact that bitcoin is a case of real use has attracted the global appeal, pushed people to focus on blockchain, we would never talk about process capabilities like blockchain and blockchain interruption if it was not for bitcoin. "

Photo by Linda Pawczuk via Deloitte.

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