Finder makes money from featured partners, but editorial opinions are our own.

Ripple and blockchain ripped as “pixie dust” in UK Parliament

XRP Weekly - CFI

As the lines between tech and finance keep blurring, banks are getting caught between two vocal camps.

Blockchain technology is "pixie dust" and a distracting fad with almost nothing to offer financial services, said Martin Walker, a director of UK nonprofit Center for Evidence-Based Management, to the British Parliament Treasury Committee.

"There’s a big problem in the blockchain world with confusing 'could' for 'is,'" he said. "All that it takes to make a credible idea into a fad is people just switch off their brains and stop thinking. Over 20 years in and around the banking industry – blockchain is a fad, but I have seen many fads in my career. If 10% of what I’ve heard in my career had come true, we would have these amazing banks that run for £1 a week."

Walker appeared before the Treasury Committee alongside representatives from blockchain companies Everledger and Ripple, both of whom spoke of the benefits of distributed ledger technology.

Ripple offers no benefits over the SWIFT messaging system, Walker argued at Ripple representative Ryan Zagone.

"The hard thing about tracking payments is actually getting the people involved in the payments to actually upload the status," he said. "So simply having a blockchain doesn't actually get people to update the status of where the payment is."

It may be worth noting that one of the benefits of digital currencies is that people don't necessarily have to upload the status.

He also took XRP's volatility to task and said introducing this kind of volatility to the financial sector is a huge risk.

"You need someone to provide the liquidity to be able to change into and out of Ripple. And holding Ripple, a currency which has seen its price drop 80 percent and then back up 100 percent in the course of the last two months is just not credible. So, putting cryptocurrencies into the financial sector is a huge source of risk."

"I would just urge the committee that we do not repeat the mistakes that have been made over and again of getting blinded by the word innovation, particularly relating to financial products," Walker concluded.

The bigger picture for banks


The financial sector, with its inherent monopoly on everything money, has acquired a reputation for systemic lethargy and risk-aversion that stretches back decades. Traditionally the sector only gets a refresher when a financial crisis melts it down into a more malleable form. Outside of that, banks are used to lumbering along and gently competing with each other in a relatively small and sterile bubble.

One of the elements that stands to catch lazier financial institutions off guard in the age of "Internet 4.0" is that their most dangerous competition isn't other financial institutions. It's tech companies.

Cryptocurrency is a new twist in a pattern that's been going on for a while now. One of the clearest examples of this might be in the remittances corner of the market. Spying a disruptable sector, tech-focused competitors arrived with much lower fees and better deals for customers. In response, banks mostly doubled down on their reputation as reliable and trustworthy entities and pumped up the wholesomeness of their advertising campaigns.

Distributed ledger technology and cryptocurrency are more threatening still, and as Moody's and others have warned banks, it can't last

And by its own admission, the Center for Evidence-Based Management which Walker represents might be the last place any bank should be going to for advice on emerging tech. Its philosophy is of the "first one through the door gets shot" school of thinking.

"Sometimes the best available evidence is not available. This is particularly the case with regard to novel management techniques or the implementation of new technologies," it says. "In such cases scientific evidence is not (yet) available and there are often too few organizational data to draw reliable and valid conclusions upon, which hinders the decision-making process and decreases the likelihood of a favorable outcome."

"Another limitation is that the current management environment changes more rapidly than in the past, which limits the relevance and applicability of scientific and experiential evidence that was generated in an organizational context that was different than today's."

There's nothing wrong with moving cautiously until more data is available. But deliberately planning to move slowly, while tech disruptors are barking at your heels, is business suicide.

The smart banks know which way the wind is blowing. And the rest probably shouldn't count on another bailout.

Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, NANO

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Latest cryptocurrency news

Picture: Shutterstock

Ask a Question

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our 1. Terms Of Service and 6. Finder Group Privacy & Cookies Policy.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Go to site