On stage yesterday in New York, Gottfried Leibbrandt gathered senior executives from some of the largest banks in the world – which also happened to be members of his interbank messaging platform – and put them on stage with the president of one of his own biggest (potential) competitors: blockchain startup Chain.
Speaking on stage in front of 500 senior financial institution leaders, Leibbrandt then deftly navigated his interrogation of representatives from the diverse group of financial institutions including JPMorgan, Citi and CLS.
While there was no doubt that members of the panel viewed one another as potential partners, potential customers and definite competitors, the Swift chief summarized what they all shared in his own closing comments: a common enemy, hackers.
Leibbrandt concluded:
"We have to be better than them."
Joining the 'dark side'
For his part, Leibbrandt seemed to be trying to establish a tone of camaraderie throughout his questioning, one that found an unlikely partner in Tom Jessop, the newly appointed president of Chain – a heavily funded blockchain startup ostensibly out to make middlemen (like Swift) unnecessary.But Chain has struck a more conciliatory tone than some of its rivals such as Ripple, which has set Swift square in its sights as the incumbent to beat. By contrast, all three of Chain's first public clients – Citi, Nasdaq and Visa – are what would be considered legacy financial institutions.
Jessop came up through the ranks at Goldman Sachs as part of the bank's fintech investing team, and was hired by the blockchain firm last year specifically because of his ability to work with incumbents.
In spite of the friendly demeanor on stage, though, Jessop, alluded to criticism that his joining Chain has been perceived as a betrayal of the legacy financial institutions from which he came.
"People always say to me, 'Why did you go to the dark side?'" said Jessop. "Actually, I don't think it's the dark side. I think there’s a lot of work we can do together, and it only happens through partnership."
Fighting for the system
Leibbrandt's own comments on using blockchain technology to thwart criminal activities echoed earlier statements made by panelist David Puth, CEO of foreign exchange service CLS.Puth drew laughs from the audience when, following Jessop’s first address to the audience, he described Chain's value proposition, saying: "You see what I’m up against?"
Puth also joked that running a "systemically important financial business" might not be the best business decision, with no pricing control and upstarts trying to take away "pieces" of what you offer and selling it to customers in a "different or simplified way".
To take on the technological upstarts head-on, Puth last year announced at Swift's Sibos conference that his firm had partnered with IBM to work on its own blockchain solution.
"When we're competing, when we're going at innovation against the likes of Tom Jessop, we have to think really hard about how we approach things," said Puth, who also indicated that his firm was looking for partners similar to Chain.
The enemy of my enemy...
However, the general consensus among the panelists was that whatever the differences between the participants, they were on the same side against criminal adversaries.To stay one step ahead of bad actors, both the strengths of the legacy infrastructure providers and the innovation of blockchain startups need to be leveraged over the long haul, according to Emma Loftus, managing director and head of global payments at the US division of JPMorgan Treasury Services.
Also speaking at the event, Loftus, whose company recently joined the Enterprise Ethereum Alliance and open-sourced its ethereum-based private ledger called Quorum, positioned partnerships across borders and via consortia as crucial to fighting fraud.
But she went a step further, calling collaboration between blockchain startups and the legacy financial system one of the great challenges slowing widespread adoption.
"This traverse from traditional to blockchain and the requisite interoperability is why people are taking a very thoughtful approach before jumping in to replace everything," said Loftus.
Innovate or lose
For his part, Charles Blauner, global head of information security at Citi – another 'bulge bracket' bank adopting blockchain – had advice of a different sort for industry startups confident that their cryptography is the solution to every financial security problem.Blauner cautioned blockchain startups that all cryptographic algorithms "degrade" over time, and that like the Roman cipher wheels of the past, even the most sophisticated encryption might eventually be hacked by quantum computers and more.
As fintech startups achieve wider adoption, he warned, the prize for successfully hacking them will increase and "the volume of attacks from potential adversaries will grow".
In addition to building platforms with easily upgradable cryptographic algorithms and intensely testing the protections, Blauner advocated for even closer collaboration between those who might otherwise be considered competitors.
"The bad guys, the adversaries … collaborate brilliantly, innovate rapidly," said Blauner. "If we can’t do the same thing, we’re going to lose and so we have to be better than them at innovation. We have to be better than them at collaboration."
He concluded:
"Otherwise, statistically speaking they win, we lose."Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Chain.
Swift panel image via Michael del Castillo for CoinDesk
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