Thread by @Arturo_P_A

I'm not a huge supporter of how finance is regulated, but paradoxically, I tend to believe that we won't enjoy the full benefits of blockchain/crypto until the tech is innovatively employed by regulated entities (e.g. open finance, account portability, self-sovereign ID, etc.).

There's another angle in this paradox, which is: blockchain/crypto founders usually want to avoid all the hurdles and costs associated with regulated services (e.g. finance), which is why there's so much stuff happening in DeFi, as it's perceived as a regulation-free safe harbor.

What most blockchain/crypto founders seem to be failing to properly address, though, is that they're favouring short-term opportunities with limited growth potential over mid/long term opportunities with much juicier prospective growth rates.

Look for the blockchain/crypto founders and startups who don't only feel comfortable with regulations, but are also looking to actually use these technologies to improve/revolutionise the existing systems (instead of trying to build no man's land).

This is precisely why I find companies like Lendonomy, R3 or even Ripple to be so interesting. They form part of a handful of companies who are actually trying to bake the technology into the traditional systems.

Distributed ledger > proprietary APIs.

Regulators in charge of supervising finance, consumer protection, competition and markets, should be actively researching how DLT platforms could be used to enforce improved oversight and transparency on these fields, as industry participants have natural adversarial interests.

To put things in context, the UK Competition and Markets Authority was responsible for the creation of the first Open Banking regulatory framework, which obliged the 9 largest banks in the country to create APIs, so they could easily share customers' data as per their request.

This was a revolutionary move in terms of competition, because it made it easier for customers to leave their banks (i.e. it enhanced account portability). — Additionally, open banking also created substantial momentum for financial service unbundling, which means that, aided by

novel figures like account information service providers (AISPs) and Payment Initiation Service Providers (PISPs), non-banking fintechs could specialize in providing certain specific services (e.g. wealth management, bill switching, remittances, etc.), whilst delegating

banking processes to actual banks through their AISP and PISP licenses.

This phenomenon (open banking) triggered an unstoppable wave of competition and improvement of financial services. Definitely one of the main reasons the UK is the global fintech hub it is today.

Now, imagine what would happen if, instead of requiring banks to share customer data through the maintenance of proprietary APIs, they were required to store all customer objects (data, accounts, assets, etc.) in consortium-managed distributed ledger platforms.

The above would reduce account portability friction and costs to near-zero levels, which means that customers could switch their financial service providers as easily as they switch from Target to Walmart and vice versa. Competition in financial services would be taken to a

whole new level.

Moreover, a scheme such as this could be extrapolated to other industries, such as telecomm (carriers), utilities, ID providers, etc. All whilst the different industry-focused DLTs could interoperate and share info. between each other as per customer requests.

These DLT platforms could have tiered access structures, where different participants could have authority to access different data levels, according to how they're regulated.

More importantly, consumers would have access to their info, how it has been used, when and by whom.

Ideally, these DLT platforms would have open source components that would allow for the creation of independently-maintained explorers (akin to crypto explorers).

Switching from one bank to another would be as easy as importing your ETH or XRP wallet into another client.

There are things that crypto guys can learn from traditional finance guys, and there are things that traditional finance guys can learn from crypto guys.

The most interesting stuff will arise in the intersection between both worlds.

/End