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Posted in e-commerce Lewis Cohen

Hogan Lovells and SFIG get to grips with the structured finance blockchain

Chances are, at some point you’ve heard of the blockchain, or perhaps at least Bitcoin.  It’s an increasingly hot topic as more and more attention is being paid to digital currency.  The blockchain is what makes Bitcoin, and other similar transactions involving digital currencies, viable.  Simply put, a blockchain is a time-stamped and linked shared digital ledger of transactions, accessible publicly or by a defined group.  As transactions get executed, they get aggregated into “blocks”, and each completed block is added to a linear chain in chronological order. This article provides a good primer on blockchain.

Very recently, I had the pleasure of moderating an engaging symposium on the future of blockchain, hosted at Hogan Lovells’ New York office.

Organized by the Structured Finance Industry Group (SFIG), the panel brought together some of the key players in the industry, including Caitlin Long, advisor at Symbiont – a tech company bridging the gap between Wall Street and the blockchain,  Andrea Tinianow, Global Delaware Director and lead for the Delaware Blockchain Initiative, K. Waterman, Managing Partner and Chief Technology Officer at Ranieri Strategies – a collection of investment and asset management companies focused on financial services and technology, and Marco Santori, Partner at Pillsbury Winthrop and State’s legal advisor on the Delaware Blockchain Initiative.

Everyone brought in a unique perspective, and provided insights on what is happening now in the world of blockchain. For example, central banks around the globe are looking to put financial transactions (and, possibly even their home currencies) on a blockchain. In fact, the Dutch Central Bank is working on a proof of concept with its own digital coin on a blockchain, and the Bank of England  is rumored to be making a big announcement on blockchain very soon, perhaps related to the previously-discussed plans to launch their own crypto-currency. Delaware also has its own blockchain initiative, and is lending support for the technology, including putting public documents on the chain

Beyond the current state of affairs, we also discussed the implications these developments have on the world of securitization. As the blockchain becomes more accepted globally, we’ll start seeing financial transactions happening on there.  This will greatly change the dynamic, as these transactions will become more peer to peer, changing the role of intermediaries. While some players in securitization (such as Trustees) may see their roles reduced, other new asset classes may become possible and, over time, we might start to see the whole industry benefitting greatly from these developments.  There will be challenges, such as how the data is stored and accessed, but blockchain may well come to redefine securitization in some interesting ways.

Needless to say, the audience, which consisted of representatives of the legal, finance and fintech sectors, was engaged. I think the one exchange that perfectly encapsulated the sentiment of the evening was when one of the guests in the audience asked “When will blockchain start playing a key role in finance?” to which our panel all responded with a resounding “Right now!”