By Staff Writer
Ben Quinlan is the founder of boutique financial advisory firm Quinlan and Associates. He has previously worked at Deutsche Bank, UBS, and Oliver Wyman in various capacities before founding his own advisory firm. He also sits on the board of the FinTech Association of HK. He shot to fame in 2018 with his bearish forecast on Bitcoin (see here) in a report titled Fool’s Gold: Unearthing the World of Cryptocurrency.
Q: In your work as a fintech consultant to big banks, what sort of enterprise blockchain your clients are most excited about? Are they really into it, or just paying lip service?
A: Corporate Banking: JPMorgan is deploying its Quorum technology + JPM Coin for interbank settlement and cross-border payment: JPM Coin will be used to settle payments between clients, and the lender will then work to transfer cross-border payments or corporate debt issuance services on to the blockchain
- Transaction Banking: HSBC is applying blockchain technology for its trade finance platform: owned and operated by the Hong Kong Trade Finance Platform Company Limited (HKTFPCL), eTradeConnect is a platform built on Blockchain allowing buyers and sellers to create, exchange, and confirm purchase orders and invoices in real-time, share information on a “need-to-know” basis, as well as submit applications for financing on one single interface. Participants are expected to benefit from enhanced transparency and potential access to multiple banks for trade loans
- Exchanges & Settlement Agencies: Post-trade settlement: DTCC, CSE, and ASX are exploring blockchain application on its post-settlement cycle, to potentially reduce the T+2 cycle to T+0.
- Investment Management: Crypto-custody: Nomura and Fidelity Investment are looking to promote cryptos as an alternative low-risk, low-return investment asset through the provision of robust financial market infrastructure, including custody services.
Q.What are some of the best use cases of blockchain you have seen so far in finance? Where do you think it can be most useful and practical?
- All listed above
- The most practical and useful way of applying DLT technology is enhancing parts of financial institutions’ operations that can benefit most from DLT technology, including reducing counterparty risk, providing robust security, and enhancing efficiency
Q: What do you think of crypto assets as a new asset class? Do you see more fund managers, both traditional and new, issuing crypto assets in Hong Kong now that the SFC has issued a new legal framework for crypto assets?
- As we outlined in our 2018 report, cryptos are here to stay as a new asset class, and more start-ups and enterprises are exploring opportunities around how to apply blockchain technology to traditional market operations
- Most focus is being directed at how to tokenise alternative assets with limited liquidity, such as art-work and real-estate
- However, overall sentiment still appears to be quite negative
- For alternative assets, a few art and real-estate dealers we have spoken to can see what the technology is trying to solve with respect to liquidity, but they say this is not how the actual market dynamic works, e.g.:
- For artworks, in particular, value is created by critics, commentators, artist bios, social context, and the previous owner / buyer
- The uniqueness and scarcity (i.e. exclusivity) of the piece drives most of its value in the market
- As soon artworks can be democratised with blockchain and retail investors can have access, valuations will collapse
- The same logic can be applied for high-end real-estate
- For alternative assets, a few art and real-estate dealers we have spoken to can see what the technology is trying to solve with respect to liquidity, but they say this is not how the actual market dynamic works, e.g.:
Q: What are you hearing from your clients?
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- Sentiment still remains negative after the 2018 crypto winter, so traditional managers that try to raise-fund to invest in cryptocurrencies or use blockchain technology to tokenise their underlying fund are having difficulties in convincing investors
- Some fund managers are still exploring cryptocurrencies as a source of portfolio diversification, but many remain bearish on the ability to effectively tokenise their own funds.
Q: What do you think about the Chinese government’s new cryptocurrency, DCEP? Will it help China establish a leadership position in financial innovation, especially in blockchain?
Central Bank digital currencies are a type of digital payment, so it is a natural extension of an area in which China is already a global leader.
- If DCEP is widely adopted in China, transactions / the transfer of money will be even cheaper for its citizens and institutions, allowing China to have further control over transaction information
- The fact is, China already has an established leadership position in financial innovation (e.g. PingAn, Ant Financial, Tencent’s WePay, etc.)
Q: Finally, the future of Bitcoin and cryptocurrencies? Where do you think they will be in say two to five years’ time?
- DLT will survive, and be widely applied to diverse industries. The technology has considerable potential to enhance company operations, but it will not be as revolutionary as the internet or IoT
- Major cryptocurrencies will survive because many applications have been built on top of their network (e.g. BTC, ETH, and XRP)
- The future of BTC will largely hinge on its ability to act as a mainstream form of payment – it is likely continue exist in parallel to fiat, but is very unlikely to replace it as a mainstream form a currency due to low acceptance rates and its extreme price volatility
- Central Bank Digital Currency (CBDC) issued by government-level are likely to replace stablecoins (e.g. USDT)
- Very few alternative coins that lack a meaningful use case (i.e. operate solely as a speculative asset) will survive
