Few hands rose when the audience attending one Summer Davos sub-forum on financial technology (fintech) were asked whether they believe GDP would be counted in bitcoins ten years later.[Special coverage]
However, almost all nodded when someone pointed out that blockchain, the underpinning technology of the digital currency, will be a revolutionary force to the financial sector.
Blockchain is a digital ledger system that is distributed to different computers. It uses sophisticated cryptographic techniques to create a permanent, unchangeable and transparent record of exchanges to trace each transaction.
Blockchain is drawing increasing attention from fintech companies, investors and regulators globally despite debates about its future applications and low public awareness, according to experts attending the the Annual Meeting of the New Champions 2016 from June 26 to 28 in the north Chinese city of Tianjin.
"Financial services are one of the largest industries that is still offline. It may be 'electronified' but it hasn't been digitized to make smart use of data, so we are only just beginning this technological revolution," said Catherine Wood, chief executive officer of ARK Investment Management in the United States.
"We believe that blockchain is a potentially transformative technology that will leave as deep a mark on our world over the next 20 years as the Internet has over the last 20 and might disrupt many of our existing business models", according to Axel Lehmann, UBS Group chief operating officer.
The investment bank released a white paper on the possible applications of blockchain technology on Sunday, depicting a blockchain-enabled world with a single, universal, trustworthy and indestructible financial ledger where everyone is honest and reliable in transactions.
Global investment in fintech ventures hit 5.7 billion U.S. dollars in the first quarter of this year, a rebound to the levels in 2014. About half the funding went to projects in Asia, primarily in China.
Chinese fintech firms are responding swiftly to the new trend and Chinese regulators have shown growing interest in the possible applications of blockchain, according to Eugene Qian, head and president with the China branch of UBS Group.
Non-commercial organizations such as China Ledger Alliance and China Blockchain Research Alliance were set up this year to research and promote the applications of blockchain technology. Startups such as privacy protection firm PDX and financial business streamlining service provider Xindi are cropping up.
China's central bank is also researching on blockchain-based digital currency to reduce cost, improve efficiency and counter crime.
"As a digital ledger, blockchain is fully transparent. There is an audit trail. We are eliminating a lot of middlemen here. Fintech will be more of an answer to the problem of fraud than a cause of it," said Wood.
As the intermediary role becomes unnecessary with the application of blockchain technology, large and centralized organizations might be challenged. Instead of making them superfluous, however, the blockchain may make banks better at what they do, UBS report noted.
"It will take some time to build up awareness and liquidity. But when we invested in the peer-to-peer lending model in China over five years ago, it was quiet and not crowded at all. People said we were crazy. Bitcoin and blockchain leaders will have to be crazy for some time still," said Tang.
