ConsenSys is a global blockchain technology company that develops protocol infrastructure, scalable developer tools, enterprise-grade networks, compliant digital assets, and programmable payment systems on the Ethereum blockchain. Ethereum is the most trusted open-source blockchain in the world with easy-to-use tooling, advanced security, always-on reliability, and privacy and permissioning features that leading businesses need.
Recently ConsenSys has partnered with the Bank of Thailand, french bank Societe Generale and the Reserve Bank of Australia on separate CBDC projects.
Lex Sokolin is Global Fintech Co-Head at ConsenSys and focuses on emerging digital assets, public and private enterprise blockchain solutions, and decentralized finance.
What has been the traditional company response to financial technology innovations? How has this changed over the past few years?
Most financial companies were slow to adjust to Fintech in the early 2010s, not seeing the value of digital projects on a standalone basis. Early responses were to create venture capital arms, or incubator programs, or other ideation factories. However, large tech firms like Apple and Google and Facebook have been racing into financial services offerings to consumers, and the Eastern fintech players similarly have a strong hand and trillions in assets. As a result, we see many large public incumbent bank state that they are technology companies too and invest in digitization, blockchain, and artificial intelligence. Instead of pursuing one-off digital distribution projects, most top banks now understand the existential change represented by digital business models, platforms, and a Covid type working environment.
As one of the earliest companies delivering enterprise blockchain solutions, ConsenSys has played a central role in the delivery of the technology’s potential. For our clients, this results in industry-wide simplification of operations and documentation. The impact of blockchain technology on international trade finance has spurred many companies and consortia to update their technology. Major trading companies around the world are recognising the deep impact of Ethereum blockchain technology in operating global supply chains, managing trade finance, and tokenization. Further, blockchain-based commerce enables the tokenization of existing documents, letters of credit, and other instruments, which implies more efficient processing and faster execution along the value chain.
Is there anything that has created a culture of change inside the company?
The change happens largely in the world, in the minds of customers and regulators. Companies are corporate creatures that evolve to fit their environment, by orienting around profitable opportunities. There are now dozens of multi-million user fintech across the US and Europe, and this is hard to ignore. Apple and Google are offering payment and banking services, through partnerships. Thus the company changes by its context. Also, as the next generation of talent comes into value creation roles, you see incremental change in traditional organizations.
What Fintech ideas have been implemented?
For ConsenSys, we have built out Codefi, a fintech suite that connects core financial use-cases to their blockchain counterpart. That includes modules for Assets, Markets, Payments, and Compliance, which are then integrated into the offerings of financial institutions and retail footprints. Our crypto-wallet MetaMask recently launched best-execution decentralized trading functionality using a trading engine aggregator, for example.
Our products — MetaMask, Codefi, PegaSys, Infura and Diligence— serve millions of users, ranging from financial institutions to developers and retail users of Ethereum. ConsenSys products digitize business processes in global trade, asset management, payments, capital markets, and decentralized finance. Our tools for building compliant digital assets are fundamentally changing the way institutions approach the exchange of value.
What benefits have these brought?
What we understand is that the nature of programmable blockchains like Ethereum is inherently economic and financial. It creates and enforces digital property rights through software executing on a global network. Therefore, our focus on Fintech is all about enabling more financial use cases and products to exist on these global networks. Our company focuses on user enablement, bringing more people into the decentralized ecosystem, developer enablement, getting builders up and running with blockchain, and financial enablement, helping to move financial activity to new venues. That will bring a benefit not just to our company, but to the entire global economy across all asset classes in finance.
Financial products tend to operate across completely different systems that are not interoperable — consider loans, equities, deposits, real estate. This doesn’t have to be the case.
The tokenization of real-world assets can fractionalize virtually any asset, making it tradable and investable, including property, company shareholdings, oil, aircraft, cruise ships, or fine art. The Codefi platform allows users to create, issue, and manage the lifecycle of tokenized assets and digital financial instruments on a blockchain network.
While much of the financial sector will continue to function as it does today, we have an opportunity to improve how products are manufactured and distributed. This will remove deadweight loss from society and the economy, and help people focus on more productive pursuits rather than reconciling financial statements.
Do you see any other industry challenges on the horizon?
Blockchain and bitcoin were traditionally viewed as an unregulated and untrustworthy technology but things have changed a lot in the past five years and regulation is developing to meet the emerging technology. Even though it will take time for regulation and regulatory framework to catch up, I am optimistic that we can achieve a unifying Ethereum standard to override geographic differences between the US, Europe and the Middle East for example. In the second half of 2020, we saw the Chairman of the SEC discuss how the regulatory body is beginning to look at the possibility of BTC ETFs, changing the narrative and opening the door for the next generation of governance that supports rather than resists new technology.
Can these challenges be aided by Fintech?
Technology is just a tool, like fire or the printing press. Finance itself is timeless — people have always paid, saved, and invested in their future. To that end, the continuing evolution of technology is just a mirror reflecting back to us our social context and needs. Fintech will help more people access financial products, and blockchain will help more people build financial products.
Over the next 5 years, ConsenSys will continue to offer a robust blockchain operating system that will enable anyone— from governments to enterprises and individuals— to harness the power of Ethereum. One of the most significant digital transformations that we will witness in the next 5 will be the use of CBDCs (central bank digital currencies built on blockchain architecture) as a means of transacting in the modern global economy. ConsenSys has already partnered with the Hong Kong Monetary Authority, Central Bank of Thailand, Reserve Bank of Australia and Societe Generale to aid in the development of their own CBDC. Massively distributed systems will underpin our financial lives, accessible openly by anyone, anywhere.