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 class as part of Cambridge’s Masters in Finance degree – 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. 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 surveys. You 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.
