Despite the “bitcoin bad, blockchain good” mantra that the market seems to be hearing more and more, blockchain's ability to disrupt the financial services space is by no means a sure bet. Value volatility and recent moves by regulators to reign in the cryptocurrency bonanza may have a residual impact on the market's (and investors') faith in blockchain, too.
But Tan Tran, CEO of holding company Vemanti Group, believes that regulation shouldn't be feared. In fact, in many ways, he recently told PYMNTS, it should be embraced.
“I think regulations are actually a good thing for the industry in general,” he said. “It will keep the bad actors away, and at the end of the day, investors need to have a sense of security. Regulation will accelerate the deployment of the technology — government intervention is good in the sense that it validates the technology.”
Tran, like other actors in this space, acknowledges the current market volatility of cryptocurrencies. These are natural market corrections, he said, but they could lead to “growing pains" for blockchain technology as a whole — albeit healthy ones.
“The point of cryptocurrency is about decentralizing everything, and about complete transparency,” he said. “It's not about bypassing government or regulations. I think we're going through this phase now, which is a good thing.”
There is confidence that regulation may help to further legitimize blockchain, but where will that legitimacy ultimately land? For Tran, he sees huge potential across the Asia Pacific (APAC) region and, in particular, in addressing the vast populations of un- and under-banked individuals. It's not just consumers who struggle to access banking services, however: APAC small and medium-sized businesses (SMBs) are also challenged with financing and services that would be considered standard in developed markets like the U.S. and Europe.
According to a report released earlier this month by EY, 21 percent of people in the world — about 1.6 billion people — are underbanked. More than 200 million micro and SMBs fall into the underbanked category, too, with access to finance the largest hurdle for many of these firms.
EY pinpointed the APAC region as a particularly wide opportunity for financial services players to address this gap: Bank revenue in this market, researchers said, could reach $88 billion by 2020. If traditional banks don't step in, alternative financial services firms will.
Separate research released last year from Retail Banking Research (RBR) found that the Asia Pacific market is home to more than half of the world's ATMs, and that's driving the region's reliance on cash. For small businesses, that can spell trouble when managing finances, especially when they struggle for accessible banking services.
Tran said this is where blockchain could be especially impactful.
“Blockchain technology would decentralize the decision-making process, so now [underbanked] people can transact directly, and with complete transparency,” he said. “Especially when you add smart contracts to it.”
Underbanked SMBs, he said, provide “huge potential” for the technology, too.
“A lot of smaller, private small businesses are under-funded,” Tran noted. “It's not like here [in the U.S.], where we have an established financial and banking system. If you implement something like a decentralized blockchain, a P2P lending system, that would enable [SMBs] to get funded a lot easier than going through the normal banking system. With blockchain technology, you can put a platform together that is smart contract-based, allowing individual investors to participate in a growing economy. On the other hand, you allow [SMBs] to get funded very quickly."
The other massive opportunity across the APAC region is its potential for economic growth. The International Monetary Fund (IMF) recently identified APAC as having the world’s strongest long-term economic outlook, despite short-term uncertainties. The IMF projects gross domestic product (GDP) to once again grow by more than 5 percent this year, for instance.
“Here in the U.S., we're struggling to make 2 percent,” Tran pointed out. The IMF projects 2018 GDP growth for the U.S. to hit 2.5 percent.
Not to mention, Tran said, APAC's massive population of more than 4.5 billion people.
All of this creates a market climate that’s ripe for disruption, which Tran said could be spearheaded by blockchain, and able to bypass traditional banking players while remaining compliant to address underbanked SMBs and fuel economic growth.
“That's why I'm so excited about this region,” he said. “And the most important thing is a lot of people are still underbanked. There is a lot of room for financial services innovation, because people there are still not really putting their whole trust in the banking system in those countries.”
Tran and Vemanti are putting the money where their mouth is. The company recently announced an investment in TrustPay, a Vietnamese company that uses blockchain to develop financial services across a range of areas, including business-to-business (B2B), business-to-consumer (B2C), person-to-person (P2P) and mobile banking. TrustPay is also in the midst of developing its own banking-as-a-service solution and an application program interface (API) to integrate into cryptocurrency exchange Coinbase.