Is Disruptive Blockchain Technology the Future of Financial Services?
69 The Consumer Finance Law Quarterly Report 232 (2016)
11 Pages Posted: 31 May 2016 Last revised: 24 Dec 2017
Date Written: May 28, 2016
The American corporate graveyard is littered with prior darlings of Wall Street and pillars of the New York Stock Exchange, such as Kodak and Polaroid (both photography pioneers). More recently, other businesses and entire industries that were once household names have similarly experienced plummeting demand: pay telephone manufacturers; travel agencies; wrist watch manufacturers; print news media such as newspapers and magazines; and many traditional brick and mortar retailers (replaced by Amazon). The common characteristic is that all of these businesses have become completely or substantially obsolete due to digitized technology.
Now, the equivalent disruptive technological revolution in financial services is underway. During recent years, rapid technological advances have resulted in a sea change to the way most of the world conducts and regulates financial services. While the implications are vast and the ultimate ramifications are largely unknown at this time, this article: examines the brief but important history of virtual currencies in general; considers the impact of Bitcoin in particular; and explores the promise for widespread application of Bitcoin’s underlying blockchain technological platform to the financial services industry.
This brief article proceeds in five parts, as follows. First, there is a discussion of disruptive changes taking place in financial services. Second, the article briefly explores virtual currencies and the genesis of Bitcoin. Third, there is an explanation of blockchain technology - what it is and why it is important. Fourth, the article discusses recent developments that provide a validation of blockchain application to financial services markets. Finally, there is a brief review of regulatory challenges to the adoption of this new technology. A purpose of this article is to enhance the reader’s understanding of the promises and challenges faced by financial service providers due to these rapid advances in technology.
Keywords: Bitcoin, blockchain technology, commercial law, consumer protection, crypto-currency, cyber, data storage economics, digital currencies, financial services, privacy, regulation of technology, smart contracts
JEL Classification: A10, B25, C99, D12, D23, D44, D63, D71, E40, G21, H26, K11, K14, K34, L82, L83, L86, M30, O34, P50
Suggested Citation: Suggested Citation