Blockchain Projects Meet Real-World Headwinds

Not all that long ago, blockchain was the answer to every problem in financial services, to every problem in connectivity.

But reality — chiefly the length of time getting projects off the ground, and the urgency of other technologies amid the pandemic — may be throwing some cold water on those notions.

Mitsubishi UFJ Financial Group (MUFG) said in a statement this week that it is winding down its project that was focused on blockchain payments. The Global Open Network Japan had been launched as a joint venture with Akamai, focused on the Internet of Things, with particular emphasis on payments and the movement of data.

MUFG said Tuesday (Feb. 22) that it would liquidate the project — which launched in late 2020 — and pointed to the “recent hard business environment for payments.” The company also noted that the blockchain initiative would scale as had been originally anticipated, and profitability would not be reached within a “reasonable timeframe.” Elsewhere, the bank has said it is planning to issue a stablecoin pegged to the yen.

This announcement potentially shines a spotlight on the fact that while new technologies have promise, they run into real-world hurdles that can be difficult to navigate. The fact that time is money, and no company has infinite stores of time or money means that at some point all projects have a moment of reckoning. MUFG’s actions show that an anticipated payoff was not in the cards. Anecdotal shutterings and staffing changes do not a trend make, but complexity reigns when it comes to blockchain.

PYMNTS’ own data show that a 72% of FIs plan to introduce commercial blockchain solutions. There is, however, a growing cognizance of the complexities of designing and implementing — and fully using — blockchain in day-to-day operations. We also found that blockchain adoption risks cited most by businesses were regulatory concerns (52%), uncertainty about operational efficiency (41%), data quality (37%), data security (35%) and profits (34%). Forty-nine percent of businesses believe that devoting human resources to studying blockchain solutions options may help them fight fraud.

As for the resources being deployed: Twenty-eight percent of businesses have more than 10 employees identifying and testing blockchain use cases, while just 5% of financial institutions say the same. That speaks to at least some of the time and money (and staffing constraints) mentioned above.

Read also: Banks Help Corporates Overcome Their Blockchain Regulatory Concerns

Separately, and as noted in this space on Wednesday (Feb. 23), Christine Moy, head of J.P. Morgan’s Liink network and blockchain, is leaving. Launched in October 2020, Liink is part of JPM’s Onyx division, which pioneered one of the world’s first blockchain-based platforms for wholesale payments transactions.

We note that Moy is being replaced, by Onyx’s CFO, Sushil Raja.

Read more: JPMorgan’s Blockchain Network Liink Head Christine Moy Exiting Company