What's Next in Blockchain and Virtual Assets

Unpacking Ripple UBRI Connect 2023 in Toronto

Ikhlaq Sidhu, Dean & Professor, School of Science & Technology, IE, Madrid

Markets and US Regulation:

To start, there has been a lot going on in Cryptocurrency, virtual assets, new technologies, and the ongoing questions about regulation. One one hand, FTX collapsed last year, which kicked off a crypto winter by the beginning of 2023. Since then, there has been a rebound of 30% price increase over this year. However, in my opinion, this event actually triggered a chasm between the original Blockchain/bitcoin narrative and the most likely future directions for these technologies.

The Original Blockchain Narrative Has Some Cracks:

Let me explain: The original blockchain narrative is basically an anti-government and anti-bank story. It says that we no longer need to trust banks, who are centralized and opaque custodians, and that trust can be placed in a technology that no small number of people can manipulate. The problem is that now, after FTX, it is clear that if government and regulation still have such important roles, then where is the actual value proposition in blockchain? In my opinion, technology itself will not be enough to enable replacements of banking functions because in the end, people still need someone they can call when things go wrong and sometimes someone to litigate, at least in the places where the court systems can resolve issues of this type.

Ripple XRP is A Bright Spot:

To me, the brightest spot has been Ripple and its XRP ledger. Not only, because the technology's balance between scalability, security, and transaction speed, but also because their business model has been incremental and sustaining to the existing banking infrastructure, even though it is a distributed protocol.

This was evidenced this year. In the current state of the regulatory environment, in US, the SEC seems to be surprisingly working against digital currencies and has been adding increased friction into the crypto markets. And even further, the US has apparently preemptively blocked the possibility of a Digital Dollar (CBDC) due to privacy concerns.

And even in this tough environment, one point of clarification did occur this year when the US court system rejected the SEC's attempt to stop Ripple's XRP token from being traded, explaining that Ripple's XRP digital token already complied with federal securities laws. [Credit: George Mocsary and Stu Alderoty ]

This is my reference point for saying that Ripple's approach and narrative might be the correct approach for adoption and regulation.

More Highlights from What I learned at UBRI Ripple

Having said this background context, there are a number of interesting developments on the horizon.

• Virtually every other country has already or will soon release a digital currency. The US will not because they want to limit the government's own ability to know to much about it's residents. These Central Bank Digital Currencies (CBDCs) are not necessarily based on blockchain and technically don't need to even be distributed. They will be regulated differently. They are exactly the same as the local currency (1:1) and will have the same legal structure - same legal assurance - leverages trust of existing bank. [Credit discussion on the Canadian CBDC, Andreas Veneris and Scott Hendry ]
• On the technology front, we are seeing the research agenda to be increasingly focused on two mechanisms: 1) Zero Knowledge Proofs and 2) AI/LLMs in security applications. If you are not aware of ZPKs, its an amazing mechanism, for example, to know that someone has made a transaction without sharing any of the exact details of the transactions. This might be balance between openness and security that has so far been elusive. If you want to know more, I recommend Dawn Song's MOOC which cover's the topic. [Credit to Dawn Song Song in conversation with Aanchal Malhotra of Ripple]

And finally, I'd like to share the slides and contribution of my own talk. The purpose of my talk was to introduce my views on what is happening in Virtual Asset Regulation and also introduce the methods that we will be using in our new IE Ripple Virtual Asset Regulation Lab - with the kickoff on October 26.

[The details are in the slides link: see my slides here]

Our view is that regulators are creating the rules and restrictions that make these assets safe for all of us, ventures are enabling the solutions with new technolgies, and researchers are filling the specialized knowledge gaps. We want to break all the silos so we can all advance and breakthrough together.

Find more information here: https://www.ie.edu/impactxcelerator/upcoming/

Of course there was a lot more, and the full agenda of the program is here:

Thank you to Ripple UBRI Connect 2023

Its literally the best place to meet all the relevant people and to get the insight from all of them about what's next in virtual assets and more!

Lauren Weymouth Karin H. Bauer, PhD IE School of Science and Technology Geoffroy Gérard Paris de l'Etraz, PhD Rafif Srour Guillermo de Haro Rodríguez Pamela Rolfe Juncal Sánchez Mendieta Santiago Iniguez Manuel Mu?iz