Paul Brody is the head of the world blockchain of the professional service company EY and co-author of a book of 2023, Ethereum for Business: A Plain-English Guide to the Use Case which generates asset management yields to payments to supply chains. He speaks with Global Finance of the impact of Blockchain technology on everything, routine payments to sends in cross -border funds in the future of the bank and the roles of financial and treasurer.
Global finance: If we look at what people do transactions on blockchains today, it is not mainly bitcoin but stablecoin, a type of cryptocurrency designed to maintain stable value over time. Does this surprise you?
Paul Brody: The ability of people to pay themselves in dollars is extremely precious. And to give you an idea of how stable dollars became, last month, the Ethereum blockchain ecosystem made 2 billions of dollars in stable payments, more than 99% of which were in US dollars.
Girlfriend:: Who really uses them?
Brody: The most popular initial use case for Stablecoin is by far in emerging markets. Countries without independent central banks often experience high inflation or even hyperinflation, and therefore the demand for US dollars is really high among the local population.
Girlfriend:: And they are also used for sending cross -border funds?
Brody: Many traditional cross -border systems take days to run, and they cost a good amount of money. If the two participants have smartphones and cryptocurrency accounts, you can send dollars through the borders in a few seconds for almost nothing.
Girlfriend:: Recently, the US Treasury Department seems to say that the United States does not need a digital currency from the Central Bank (CBDC), that is to say a digital dollar. It can use Stablecoin. Is it your reading too?
Brody: What we need is well -regulated stablecoin. We need regulatory guarantees to ensure that if you say that there is a dollar in a chain, there is also a dollar in the bank account to support this, or its equivalent in assets.
The CBDCs have flopped, mainly because central banks do not really know why they do them. I have spoken to many central bankers, and they generally do not know why they do it other than Facebook wanted one.
Girlfriend:: How will blockchain technology change things for financial directors and treasurers?
Brody: Financial directors and treasurers have questions to ask: am I plugged into the crypto and blockchain system? Can I make Stablecoin payments? Do I have to include Bitcoin in my business treasure alongside the obligations denominated in US dollars? Go further, can I automate my commercial contracts? My purchase? How can I manage my commercial operations more effectively? And if a customer wants to pay me in Stablecoin, can they do it? The answer for most companies today is no, they cannot.
Girlfriend:: If you are a stablecoin transmitter, how do you realize this business?
Brody: You earn money with transaction costs and, potentially, your float on the interest rate. But it depends on interest rates. If the rates decrease very low, it will be a painful affair. The costs are quite small because it is such a competitive environment.
Girlfriend:: What does all this mean for banks in the future? Will it reduce their importance?
Brody: This will change the role of banks and can decrease it. It depends on how a bank earns its money.
Banks that make money from money processing credit card transactions are most at risk because blockchains represent a new, more efficient way to treat transactions. You slide your credit card in a store, and you do not see the cost of payment, but it’s real and it’s substantial, like 3% to 4%. Transport in international wire is generally fixed costs, up to $ 50. Stablecoin transfers cost almost nothing in comparison.
But if you are a regional bank that does a lot of business funding, the blockchain probably does not change your business as much.
Girlfriend:: What about the main childcare banks, such as Bny Mellon, JPMorgan, etc.? Is their business at risk?
Brody: The main childcare banks are in an interesting place. They have a ton of assets, and if you have assets and you control and relax these assets, you are able to help people tokenize them.
Thus, this new technology is certainly a threat, but it is also potentially a substantial opportunity. At the end of the day, if you are relaxing assets and now help people to KNOW or manage them in different ecosystems, which represents the additive potential for your business.
Girlfriend:: In your book Ethereum for businessYou highlight the importance of intelligent contracts based on blockchain. With these, we can define not only dollars, but on all kinds of things, even coffee cups. Why don’t more companies use smart contracts?
Brody: The answer is that blockchains have no integrated intimacy yet, and that’s a huge problem. But it is repaired. It’s like the first days of the Internet, when we did not have encryption. Most companies do not feel comfortable doing business without confidentiality.
This is why private blockchains never worked. If companies had a private blockchain, they thought it guaranteed privacy. What they did not do is that inside this enclosed garden, there is still no privacy. If you are a big business and you have all your suppliers in your private blockchain, you still cannot run your supply process there, because the supplier A can see how much you pay the supplier B, and also how much you order at home.
Girlfriend:: What depth will banks offer blockchain services?
Brody: Each bank will offer a kind of DLT service (technology of the big book distributed). You have actions, you have obligations (to offer customers) and now you can add crypto. Other institutions can send money to an Ethereum address for you, instead of setting up a bank transfer to a bank address. There will be new versions of transfer of money and payments, and some of them will be quite sophisticated.
Girlfriend:: The skeptics ask when they see the “Killer application” of the blockchain: which means a universally used application, in the sense of which e-mail did for the Internet?
Brody: Stablecoins are the Killer application, the one that puts everyone in the chain. The StableCoin market is about to go competitive, and the stables -carriers of return will soon be available.
“Financial directors and treasurers must ask themselves: if a customer wants to pay me for Stablecoin, can they do it?”
Girlfriend:: Overall, is blockchain a niche innovation – useful but not overwhelming – or is it something that can fundamentally change global finance?
Brody: It will not only change global finance, but it will transform all world trade.
The blockchain will become the plumbing by which all B2B transactions are carried out.
And the reason why it is so transformational is that, historically, money, contracts and “stuff” (that is to say goods) were all in different systems. Companies always spend huge amounts to reconcile money, stuff and contracts. For example, it costs the large company about $ 100 to pay an invoice. And the reason is that someone in the supply must say that I have this bill. Does this correspond to the order form that I sent? Do the conditions on the invoice and the order form correspond to the conditions of the contract? And so on. Imagine a future where the money, the tricks and the terms of the contract are all in the same digital system and they reconcile all with each other. It is done instantly. In 10, 15 years, the entire process will be universal and invisible. Rear plumbing, right?
