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INTERVIEW Stop the blockchain, I want to get off


A year or two ago, blockchain was all the rage. Now, as it’s examined under the microscope, some cracks are showing in its potential applications. According to David Pearson, head of post-trade strategy at Fidessa, it’s not about how shiny the toy is, but how easy adopted it can be


Senior Fintech Reporter Alex Hamilton


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n that oft-quoted hype cycle, technologies reach the “peak of inflated expectations” and then slide down into the “tough of disillusionment”. For many years blockchain technology sat high upon that peak, and now seems to be rushing headlong into the trough. But will it emerge as a functional product in any area of the industry? One sector in which it seems to be gaining traction is in post-trade and settlement. But are there perfectly good systems already out there?


“I continually read about and see people who believe that [blockchain] will succeed, come what may,” says David Pearson, head of post-trade strategy at Fidessa. None of them, he adds, ever even asked the hard questions, let alone answer them. One of the main challenges that players have in the post-trade space, says Pearson, is that there’s “an enormous amount of data swimming around in asset managers and brokers, as well as allied services”.


“All of these things need to inter-operate in order to manage a workflow for investment management. If some of that data – or all of it – is on a blockchain there will still be problems. Saying that blockchain is some kind of nirvana seems trite.” Other sweeping infrastructure consolidation schemes, like that of SWIFT, haven’t managed total adoption. Neither have commonplace database architectures like Oracle and SAP. “There’s no precedent for unifying data storage or transaction technology, like blockchain.”


Do companies like to be seen to be testing blockchain. Some major banks have announced tests via the new technology in recent weeks, but Pearson argues that if the rest of the industry isn’t doing it, or testing it on the same blockchain, then “so what?”: “You’re essentially just creating your own proprietary database to store your FX trades on. There’s a whole world of interoperability required.”


Block to the future


Where the technology might make some headway, says Pearson, is with Blythe Masters-founded Digital Asset Holdings. It’s project with the ASX, moving the latter’s clearing services onto the blockchain,


and holds some weight because it’s a central system which others will have to connect into. “It could, if that succeeds, become a very interesting opening point for a number of technology firms … it starts to generate a community. The most important component to generating something new is understanding how to get it adopted by a community through which it can be driven forward.” It’s all very well building a shiny toy, but it needs momentum and adoption.


The post-trade landscape, from an outside perspective, can look like one packed with disparate systems. So how can it be streamlined, if blockchain technology isn’t the answer? “Lots of industry players want to collaborate but they also want to own their own technology stack,” says Pearson. “What they need to understand are the messaging standards that would allow them to work with counterparties but also make the decisions on what technology they build and remain playing in the proverbial sandpit.


“The industry need to agree on a workflow and collaborate so that standards can be laid down and enable them to make technology choices. It could be, that after receiving 100,000 trade confirmations a month, that a bank might stick them on a blockchain because they feel – internally – that gives them a great storage method.” Blockchain could be a technology choice for institutions, if they know the reasons why they’re making that decision, says Pearson. “The key thing is knowing that you can drive that technology using an industry standard that defines the interaction between various participants.”


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