I recently had the distinct pleasure of being on a panel discussion that revolved around the topic of de-risking of Caribbean banking sectors and the looming economic issues this will present. As I was building my arguments, my mind could not help but think of radical but reasonable solutions to this issue. Now, I would not wish to mislead the reader into thinking that blockchain technology is the immediate savior to all of the financial market problems one is met with in small open economies. There is, however, the need to explore the history and potential benefits in light of the rapid pace of innovation along with the huge cost savings and “sovereignty” brought about by the use of this de-centralized software. This is supported by the fact that although there may be about three cryptocurrencies that are household names (Bitcoin, Ethereum, Ripple), there are 754 in global circulation. It will certainly take some time before any of those will possibly provide the technology that can totally alleviate the de-risking problem we have. I will explain.

Bitcoin by now is the most familiar term coming out of the global financial technology (fintech) industry. It is indeed a name which is part of popular culture, even though most remain skeptical about it potential; understandably so. As the largest cryptocurrency by market value, approximately US$41 billion with 16.3 million coins in circulation, it is as much admired for the economic value it brings to investors as it is maligned for the anonymity it used to provide to transacting parties. The latter is no longer true due to the levels of oversight by financial intelligence units in developed economies. They have gone as far as Japan on April 1, 20171 in convincing governments that cryptocurrencies can be considered as a legal means of payment. This holds true especially where the authorities are able to sufficiently monitor transactions made through qualified money service businesses. This is not as inconceivable as one may think. One discerning glance online would reveal to the reader that after the famous crash of the Mt. Gox trading platform the green shoots became new standard bearers that to this day maintain know-your-customer best practices when they onboard new clients no matter where that customer resides. In contrast, some international business and “citizenship by investment” jurisdictions are at times still reputed to sidestep such regulations.

The “distributed” ledger technology behind any cryptocurrency, its blockchain, is even more compelling. The blockchain is a form of internet where the servers and databases are not owned and operated by large telecommunications companies but these are de-centralized and, like Napster, it is a peer-to-peer technology. It is basically not dependent on a middleman but resembles a marketplace where miners/producers (those who use their computers to run the cryptographic algorithms which reward them with tokens/coins on successful completion) and users (those who consume tokens for transactional purposes and, debatably, a store of wealth) transact directly with each other. This feature alone has the ability to help circumvent the major issues revolving around the move to de-risk banks which operate in the Caribbean once two events occur: the entry of additional market players, and widespread acceptance of the technology by governments and regulators.

Notwithstanding the current issues with scaling a small but growing system of computers, this ecosystem allows transactions to be verified since the blockchain software installed on the systems owned by users and producers are always approving legitimate transactions.

Your typical internet service company cannot do this in a cost-effective manner. A blockchain, in simple terms is a very secure and anonymous ledger that provides producers and consumers of the token the means, akin to the real time gross settlement (RTGS) and SWIFT transmission technologies in banking, to facilitate cryptocurrency transactions without the use of a middle man, like a central bank.2 Note that RTGS and SWIFT depend on a direct verification system used by a small number of counterparts. This currently leads to bottlenecks resulting in the throttling of transactions/wires especially within and from smaller financial jurisdictions.

Renowned venture capitalist, Fred Wilson of Union Square Ventures – on the back of participating in a $75 million round of financing for Coindesk, a news portal for all things involving cryptocurrencies – believes that the provision of technologies built on protocols, such as the blockchain, cannot just lessen the cost of financial transactions globally while eschewing the perennial financial middlemen such as central banks and commercial banks, but also allows the implementation of new kinds of ticketing solutions and marketplaces.3
To further understand this point, consider why huge players in finance and technology such as Goldman Sachs, JP Morgan and Microsoft, via the Enterprise Ethereum Alliance, publicly endorsed and are working with the Ethereum blockchain4 to further advance exchanges of value using blockchain technology just a matter of months ago.

Santander, a member of the alliance, went as far as to show how two counterparties can use Ethereum as settlement platform for a foreign exchange spot transaction. Again, this presents another potential use case in the region’s ongoing fight against de-risking. Now you may begin to question what value they must be seeing in a technology which seemingly promotes anonymity and could very well be a competing platform. But along with my earlier assertion that this is not as much of a worry as it once was, all coins and blockchains are not created equal. Several blockchains are created at an ever-increasing pace and seek to solve problems that the Bitcoin blockchain and protocol were not designed to deal with.

Ethereum, for example, takes the concept of the peer-to-peer network and basically infers that creating a token (Ether) is not enough: a network has greater value than transmitting digital currencies. And although these tokens may have value in some form or another, the best case may very well be using a token as it was originally intended: as a form of receipt.

Another system, Ripple, produces a token that is designed to exchange value only but has become rather appealing to global banks due to a design which is tackling the issue of scalability first, so as more banks potentially join the network, there should be no bottlenecks. And whereas Bitcoin and Ethereum focus on total transparency of transactions, even if the parties are perceived as anonymous, i.e public blockchains, the creators of Ripple sought to ensure that banks can create their own controlled private blockchain technology where they could control transparency. All coins are not created equal.

Consider an email sent between two individuals for a moment. An email typically contains data that is easily seen by the two individuals. These individuals, without much effort can find who sent it, who received it, the title, and the time sent. But there is additional metadata about the servers which the delivered the email; the devices and browsers used to send the email; and the IP address from which the email was sent that is not as obvious to both persons. Cryptocurrencies can have metadata attached in a similar fashion.

So you can see more than just the cryptographic hash (think a unique sequence of randomly sorted numbers and letters) that is your coin. The metadata that can be embedded into each token will have information about the senders. It extends to something as including, in the token, the terms and conditions under which the token or in this case receipt was transferred. And taking into consideration that there must have been some agreement in order for said token to have been transferred, one can look at this token as a form of a contract: a smart contract. And it is these smart contracts – a contract that within seconds is verified and recognized across a blockchain – that can lead not just to even more efficient financial sectors but e-governments, law firms, small businesses etc.

Imagine never having to go into a land registry again because your there is a verifiable record of your deed on the blockchain and you can be verified as the owner simply because the government, using a blockchain, issued you a unique token that displays to all in the network that you and the government came to agreement on your title. Bottlenecks be gone.

Ethereum also provides software developers with access to two previously very centralized resources: finance and software platforms to sell apps. One must always remember that a blockchain is just a de-centralized form of the internet and then the notion that, in the case of Ethereum, software developers can build apps to achieve any level of functionality to be sold to and to utilize the available computing resources provided by producers and consumers on the platform may not be so far-fetched. Successful Ethereum projects such as Golem provide great examples of the effectiveness of a decentralized market for apps which also can utilize the markets computing resources.

The cost of doing business online is definitely about to fall further. Financing for these projects is now easier thanks to the concept of Initial Coin Offerings (ICOs) which are very similar to an IPO. This is done under the premise that you can, using Ethereum, create a token which you may distribute to potential investors who are willing to part with their ether in exchange for that token. And since ether is easily exchangeable to bitcoin via the several cryptocurrency exchanges online, these businesses can surely finance their operations – especially if they are Japanese. The opportunities are endless for businesses worldwide, small and large.

On March 9, 2017, the Monetary Authority of Singapore (MAS) announced that they had completed Phase One of a monumental project, Project Ubin. This is an ongoing effort via the use of Ethereum, to digitise the Singaporean Dollar5. The MAS is open sourcing their findings so that Singapore’s burgeoning fintech community can contribute to its development. I am still left to wonder why we have not begun using the available legal and technological resources in a similar manner to leap frog emerging economies in this space. The future is now.


  1. http://www.coindesk.com/japan-bitcoin-law-effect-tomorrow
  2. See https://blockchain.info to get a sense of how vibrant this technology is.
  3. See http://www.coindesk.com/fred-wilson-blockchain-applications-still-biggest-opportunity-bitcoin/.
  4. http://fortune.com/2017/02/28/ethereum-jpmorgan-microsoft-alliance/
  5. http://www.mas.gov.sg/Singapore-Financial-Centre/Smart-Financial-Centre/Project-Ubin.aspx