Tuesday, February 7, 2017

"La revoluciĆ³n del bitcoin"

Full El Mercurio article here

Wednesday, January 18, 2017

Why participate in Cambridge's cryptocurrency and blockchain benchmarking study?

Below is an edited transcript of remarks I delivered at the Bitcoin and Blockchain Leadership Forum meeting on 9 December, 2016.

The Cambridge Centre for Alternative Finance, which is part of the Judge Business School, was started in January 2015. We define alternative finance as any new financial instrument, channel, or system that emerges outside of traditional financial services and capital markets. This includes crowdfunding, peer-to-peer lending, new forms of credit analytics, and the areas I focus on, cryptocurrency and blockchain.

The Centre has approximately ten people working full time; we’re very multidisciplinary, coming from fields such as finance, economics, sociology, geography – we even have a physicist on staff. I started at the centre in early 2016 and I was brought in to build our research program on cryptocurrency and blockchain/distributed ledger technology. Like many of my Centre colleagues, prior to moving to academia I worked in various private sector roles, including technology, investment banking, and start-ups.

In terms of funding, the Centre has raised approximately $3 million to date, primarily from private organisations such as the CME Group Foundation, Visa, KPMG, and other firms. We’re starting to diversify our funding base and seeing more support from government bodies. For example, the UK Financial Conduct Authority recently partnered with us to work on alternative finance research. The funds we have raised help support our teaching at the Judge Business School – we were the first UK university to offer a blockchain course as part of Cambridge’s Masters in Finance – as well as our research.

To date, our primary research outputs have been a series of alternative finance benchmarking studies, which are free to download from our website. They’re empirically driven studies that focus on presenting new data that describes what’s happening in alternative finance. For example, what are the aggregate financial flows? In what sectors and locations are we seeing the most movement? Why has there been so much recent growth in peer-to-peer real estate lending?

This last area is of particular interest to some policymakers and regulators, who have informed us that they do not have much visibility into the real estate lending taking place through alternative finance channels. You may recall that it was a sudden decline in real estate prices, driven in part by changes in the lending environment, that triggered the 2008 financial crisis.

Collecting data helps us to develop and inform research questions, such as what is the relationship between alternative finance activity and economic growth? This question is not only interesting from an academic perspective, it may have significant policy implications. Many policymakers are thinking about how to balance a desire for increasing economic growth with regulating alternative finance, and our research has shaped the policy discussion around this topic.

However, we are not able to address such research questions unless we have strong participation from you in our research surveys.

It’s important to make clear that the data published in our studies is aggregate data, not individual organization data. For example, we show country level data, or sector level data (e.g., data for all wallets, or all exchanges) but never _____ organization’s individual data. We take data privacy and confidentiality very seriously and work hard to ensure that our research does not threaten trade secrets or security in any way.

We are currently running our first global blockchain and cryptocurrency benchmarking study. On the blockchain side we’re looking at permissioned distributed ledgers and non-monetary use cases, such as provenance, as well as public sector blockchains (e.g., central bank digital currency) and what’s happening with distributed ledger technology in U.S. states like Delaware. For cryptocurrencies we’re examining exchanges (specifically security), payments, wallets, and mining.

There are many good reasons for organizations to support this research by completing our surveys. Firms can benefit from the wide exposure these reports receive as we offer all participants the opportunity to have their logo included in the report. This study will also help with the formation of key performance indicators. 

But perhaps the biggest reason for cryptocurrency and blockchain firms to participate in our benchmarking study is that this study can help the industry constructively engage regulators and policymakers. Many regulators are keen to learn more about the alternative finance sector without burdening companies with invasive and time consuming data requests. Benchmarking is a time honoured way to achieve this goal, and participation in this study is a way to signal to the world that the blockchain and cryptocurrency space is maturing.

Thank you for supporting this research by completing our surveysYou can find more information about the study, including a video of my study kickoff presentation at Shanghai Blockchain Week, in a prior blog post here. Please also feel free to get in touch by email if you have any questions. 

-Dr Garrick Hileman, Cambridge Centre for Alternative Finance

Wednesday, December 21, 2016

Thursday, October 27, 2016

Video: Introducing the Cambridge Global Blockchain Benchmarking Study - Links to Surveys Below

This presentation was given at Shanghai Blockchain Week in September 2016. The slides for this presentation can be viewed here and the study's press release here.

Links to currently open surveys can be found on the Cambridge Centre for Alternative Finance's website here.

More information about the Cambridge Centre for Alternative Finance can be found on our website, and past alternative finance benchmarking studies can be freely downloaded here.

Tuesday, August 23, 2016

Thursday, August 4, 2016

Convoco 3.0 blockchain panel - Salzburg, Austria, 30 July

My fellow Convoco blockchain panel members: Bruce Pon, Julie Maupin, Marcella Atzori, Ada Zhao.

Wednesday, June 22, 2016

Statement regarding Andrew O’Hagan’s reporting on Craig Wright and the London School of Economics

In a recent article on Craig Wright and the identity of Satoshi Nakamoto (the pseudonymous creator of bitcoin) in the London Review of Books, Andrew O’Hagan made the following comment about LSE:
"Originally, the plan was for the London School of Economics to host a panel discussion about the evidence and the findings, but someone seems to have blabbed to the Financial Times, which ran an article on 31 March. ‘After nearly four months of silence,’ the FT blogger Izabella Kaminska wrote, ‘and a bitcoin community mostly resigned to the notion that the story was an elaborate hoax – conditional approaches are being made to media and other institutions in connection to an upcoming “big reveal” of Wright as Satoshi Nakamoto.’ Her source was clearly inside the project.”
I am one of a small number of LSE staff actively researching bitcoin and my research involves working with hundreds of individuals and organisations who trust me to confidentially manage information and data. As a result of the comment made by Andrew O’Hagan, I feel that it is necessary for me to make it clear that I had no knowledge of or involvement in any discussions between LSE and Craig Wright (and/or his associates) and no involvement in disclosing anything on this matter to the Financial Times. I only first learnt about any discussions in mid-May.

Thank you for taking time to read my statement on this matter, and please feel free to contact me or LSE External Communications with any questions.

Sincerely, Garrick Hileman

Thursday, April 14, 2016

Taxation in the Digital Age: Bitcoin and other Cryptocurrencies

I travelled to Ferrara to speak at the workshop, Taxation in the Digital Age: Bitcoin and other Cryptocurrencies. The workshop was held at the Rovigo campus of the University of Ferrara on April 12. 

More information at the link.

Thursday, January 28, 2016

Why the People's Bank of China May Consider Embracing Bitcoin

The idea of central banks owning bitcoins as a new reserve asset is no longer far-fetched. Indeed, a central bank recently published a research paper weighing the pros/cons of central banks holding bitcoins in reserve, and central banks in the UK, The Netherlands, Tunisia, Ecuador, and China have all announced they are exploring creating their own bitcoin-like digital currencies.

It has been fascinating to observe bitcoin's growth in China, which for some time now has dominated both bitcoin exchange trading and mining. Although the reasons are not immediately obvious, the People's Bank of China (PBOC) may have particularly good cause to consider embracing bitcoin.

Before getting to the pros, one argument against Chinese authorities holding bitcoins (or encouraging the use of non-state cryptocurrencies in any way) is that bitcoin undermines Chinese capital controls. However, it's not entirely clear at present how much capital control evasion is taking place via bitcoin, which is less anonymous than originally advertised. In other words, concerns over bitcoin enabling capital control (and tax) evasion may be overblown.

Regardless of whether bitcoin actually undermines capital controls, China has made clear its intention to be a global financial power by 2020, with the renminbi taking on a global reserve currency role and Shanghai serving as a global financial centre. To achieve these objectives China must reduce capital controls and embrace open financial markets, as the United States and pre-Second World War Britain did.

The emergence of a new reserve asset (preferably, from the Chinese perspective, after China has had a chance to reduce its vast holdings of U.S. dollar denominated assets) could be seen as a positive development for China in the perennial global 'game of thrones' played by superpowers:

  1. It would dilute the status of the U.S. dollar (and market for U.S. treasury securities) as the world's dominant reserve asset.
  2. This in turn should diminish the Fed/Treasury's grip on the global financial system.

However, why wouldn't China instead prefer to see gold, another non-nation state controlled but already established reserve asset, return to prominence? After all, the People's Bank of China has been discreetly acquiring gold for years.

There are several reasons why gold is problematic. First, while the idea of boosting the reserve status of gold received some support following the 2008 financial crisis from then World Bank President Bob Zoellick and others, the 'barbarous relic' and a return to anything akin to a gold standard is still largely out of favor with economists and central bankers.

Further, even if gold came back into fashion, two problems remain from China's perspective:

  1. China's reported gold holdings still trail the U.S., Germany, IMF, etc. by a significant margin.
  2. Gold is expensive (global market cap of approximately $7 trillion); China may never catch-up to the U.S. in gold holdings.

Bitcoin, by comparison, is cheap, with a current market cap of approximately $6 billion. The U.S. government, which at one point was one of the world's largest bitcoin holders following the seizure of the Silk Road dark web marketplace, also recently liquidated its position.

Perhaps more importantly, with over half of all bitcoin mining taking place inside 'The Great Firewall of China', Chinese authorities can exert influence over bitcoin (and quietly acquire a large position). As bitcoin's software code is pliable, the rules that govern how the cryptocurrency functions can be reprogrammed. In other words, wider monetary use of bitcoin need not represent a return to the gold standard, which has been one of the chief criticisms of bitcoin amongst economists.

The exact path bitcoin would need to take to become a new reserve asset is unclear. It seems unlikely today that the IMF, PBOC and other central banks would come together and anoint bitcoin as a new reserve asset. Declining confidence in the monetary system combined with increased bitcoin use would be necessary before any such change would occur.

While bitcoin's price has recently rebounded amid currency crashes and financial instability in China and elsewhere, bitcoin still lacks a mainstream 'killer app'. The many bitcoin applications promoted by entrepreneurs and venture capitalists, such as cross-border remittances, micro and macro payments, and powering machine-to-machine transactions, have either failed to gain significant traction or are still several years off. By many measures bitcoin's advance has slowed as interest has shifted towards non-currency applications of bitcoin's underlying distributed ledger ('blockchain') technology.

Given the powerful 'lock-in' effects of established currency networks, the fact that millions of people have chosen to use bitcoin can be considered a minor economic miracle. But how much longer can bitcoin defy the odds? An influential member of the cryptocurrency community recently declared that bitcoin is in a 'death spiral'.

Many 'cryptotarians' will no doubt howl over any suggestion that state actors like the PBOC get involved with bitcoin, but support from officials may be just what bitcoin needs to continue its improbable journey. In addition to exploring its own new digital currency, the PBOC should take a close look at embracing the already existing one largely powered from within its own backyard.