In a potential tectonic shift, industry heavyweights form a blockchain alliance

Last week, four of the world’s largest automakers (Ford, GM, BMW and Renault) launched a blockchain1 alliance that could represent a tectonic shift, not just in the adoption of blockchain tech, but also in the race to lead the next iteration of the “automobile” industry.

The short version is that the new working group—called the Mobility Open Blockchain Initiative (MOBI)—is aiming to put blockchain tech into your car, for use cases as diverse as vehicle identity and ownership, ridesharing, payments, navigation, insurance, and many others. But while the group was founded by four automakers, it’s also open to energy companies, infrastructure providers, and public transportation providers, potentially expanding the connectivity of automobile-based blockchains to a much larger transit network.

Another important development is that MOBI is looking to create standards for data to have property rights. Legacy tech players like Apple and Google are vying to get the data you produce in your car so that they can aggregate and monetize it—never mind their efforts to actually design and build the next generation of cars. MOBI potentially represents an end-run around the programs of legacy tech leaders, making customers’ data self-sovereign and giving consumers control over data property rights associated with transportation.

Why is this potentially a tectonic shift? Because it has the potential to disrupt the growth plans of legacy tech into the auto sector.

A New Cornerstone Laid in Fin-Serv?

Crypto-Custody Solutions on the Horizon for Institutions

The New York Times reported last week that Intercontinental Exchange (ICE), parent company of the New York Stock Exchange, is planning to open a digital currency exchange where institutional investors can buy, trade and hold bitcoins. Included in the plan would be one-day swaps2 contracts that “end with the customer owning Bitcoin the next day — with the backing and security of the exchange.”

Why is this another potential tectonic shift in the crypto-blockchain space? Because any program that enables institutions to hold digital tokens has to include a custody solution, a challenge that has until now eluded the industry.

One of the key roadblocks to institutional participation in trading and owning crypto3-assets has been the lack of custody solutions—which, for institutional fiduciaries, would run afoul of all kinds of investment, risk management and compliance mandates. Putting a viable custody solution in place would bring institutions one giant step closer to being able to trade crypto-assets in client accounts.

Where will the next shoe drop? Well, investors should be keeping an eye on the biggest players in the custody business—BNY Mellon, State Street and JPMorgan being the mightiest of them all. (It was revealed last week that, despite Jamie Dimon’s public disdain for Bitcoin, JPMorgan filed a patent for a blockchain-based settlement technology. Could his resistance to crypto be wavering?)

If one of the big custody players were to announce a comprehensive custody solution for crypto-assets, that would be another tectonic shift. Stay tuned.

WHAT DOES MY 2 CENTS ADD UP TO?

One has to think about the adoption of these new technologies in geologic terms. As the tectonic plates of a new continent begin to form, cool, and shift into place, there will be moments when things potentially change in a big way, very fast. That’s how I look at the MOBI and ICE developments.

Resistance, however, is still firm among many legacy players. Last week, the well-known research company Gartner Group published the results of a Chief Information Officer (CIO) survey, showing that only 22% of CIOs plan on using blockchain technology. Gartner concluded that the technology is “massively hyped.”

For investors this is potentially good news, as it may actually support today’s crypto-blockchain investment thesis. One of the biggest mistakes an investor can make is to wait for a change in sentiment, and for the skeptical herd to suddenly pile into a new market. That’s when investors are most at risk of buying at the top.

It makes me think of a quote from the President of Michigan Savings Bank when asked about investing in Ford Motor Corp. in 1903: "The horse is here to stay, but the automobile is only a novelty, a fad." Blockchain and crypto skeptics are ignoring a technology potentially even more revolutionary than the automobile was in 1903.

And yet, that skepticism is predictable. When you ask legacy providers about bleeding-edge new tech, you get a legacy point of view, defending a legacy business model. The most telling quote of the Gartner press release says: “[Blockchain] therefore implies that traditional lines of business and organization silos can no longer operate under their historical structures.”

Exactly. That’s the opportunity MOBI and ICE are pursuing. That is the evolving world just now taking shape. And who knows what kinds of vibrant ecosystems will be built atop these new continents?

Currently, the skeptical herd is still looking back over its shoulder—believing that “historical structures” will last forever. I believe that forward-thinking investors would be wise not to make that same mistake.