Blockchain: The Technology Likely to Disrupt Global Financial System

Rabat – When Henry Ford made the first automobile in the early 20th century, people couldn’t fathom why they would need such vehicles. When asked, most Americans said that they simply wished for horses that eat less and run faster.

Less than three decades later, the industry became the cornerstone for America’s rising consumerist market. By the early 1980s, the industry accounted for one in every six jobs in the country, according to some estimates.

The early skepticism towards automobiles is by no means an isolated incident. Whenever a new technology emerges, opposition is bound to follow.

One would assume that after all the technological innovations humanity made peace with, accepting change would become easier.

As optimistic as the idea seems, the fact that the internet overflows with theories linking 5G technology to COVID-19 – in disregard of common sense – can only indicate otherwise.

Therefore it comes as no surprise that opposition has arisen regarding the question of the rising trend of the virtual economy, including cryptocurrencies and blockchain, a digital ledger that tracks and verifies transactions within a network. – Policymakers worldwide have opposed the idea, citing concerns over money laundering and criminal activities.

In response to these accusations, blockchain and cryptocurrency proponents believe that these innovations are the backbone for a third internet revolution. This revolution intends to change the global financial system and promises to bolster financial inclusion and the distribution of power among the majority regardless of geography, ethnicity, or gender.

Interview with Blockchain proponent Raj Chowdhury

Speaking to Morocco World, Raj Chowdhury, an investor, blockchain pioneer, and CEO of blockchain company HashCash Consultant said he believes that blockchain technology “will disrupt the existing incumbent in the financial industry if they do not either work towards it, make the changes, and align themselves with the change.”

While the basic algorithm underlying Blockchain technology dates back to 1991, the technology was first used in 2008 to create the first cryptocurrency Bitcoin.

Ever since the creation of Bitcoin, the use of blockchain technology expanded to include smart contracts, binding digital contracts that cannot be modified.

In addition, a blockchain allows for the creation of new cryptocurrency via an operation known as ‘mining.’ Cryptocurrency mining refers to an energy-intensive process using tremendous computational power to solve blockchain-embedded algorithms to create new blocks within the blockchain and unlock new coins.

One of the most recent applications for blockchain technology is the creation of Decentralized Finance (DeFi) products. These are financial instruments that do not rely on central financial institutions for security, as they are verified by users on the network.

When it comes to blockchain-backed financial products, the possibilities are endless, according to Chowdhury.

His company, HashCash Consultant, is actively working to produce tailor-made blockchain-backed financial services for a wide range of purposes. “HashCash had been in the space for 7 years now, since 2015, and we have served dozens, and now hundreds, of clients across the globe in at least 20 to 30 countries.”

The blockchain company offers “exchanges, payment processors, traceability products, and lending platforms”

According to HashCash’s founder, financial inclusion is pivotal within the company’s strategy. “We are always trying to find avenues where we can look at non-profit fundraising activities and the disbursement of funds using blockchain.”

HashcCash’s initiative in Morocco

The company in March launched a blockchain-powered lending service for Moroccan women entrepreneurs.

Relying on DeFi principles, the service intends to allow Moroccan women entrepreneurs access to funds provided by international lenders through decentralized pool lending.

“The idea is to focus on women entrepreneurs and not with huge investment chunks, but with smaller, as it says, micro-lending, and help them with their cash flow if running a startup business,” Chowdhury explained.

The HashCash founder told MWN that the initiative aims to be part of the emerging startup trend in the North African country. “One of the toughest things in the world is to make a startup work, and we have seen many women entrepreneurs in Morocco attempting to do so, and we want to join hands with them to be able to offer them the capital gaps in their operational activities.

Through the micro-lending platform, HashCash hopes to offer Moroccan female entrepreneurs funds using tokenized and crypto-lending services, he added.

Explaining the benefits of opting for DeFi pool-lending, Chowdhury said that Blockchain technology offers “a key benefit in fund disbursement for non-profits.”

“One of the key challenges of raising, disbursing the funds that you raise as a nonprofit is that the people at the end, the last mile, do not receive most of the funds because of middlemen and a lot of parties that are in the middle that end up eroding the funds that should, in an ideal world, reach the end receiver,” he elaborated.

The utility of blockchain

What makes blockchain-backed financial services stand apart from conventional financial services is the level of transparency, Chowdhury pointed out.

Blockchain makes financial services “very accountable because every step in the flow of the fund is stored in a mutual ledger, that’s something that blockchain, the technology specifically brings to this world in addition to so many other applications.”

Chowdhury sees these advantages as making blockchain-powered transactions a de facto financial instrument for humanitarian purposes, Small and Medium-Size Businesses (SMEs), contributing to the development of emerging economies, and helping war-afflicted regions.

Despite these seemingly positive benefits, the finance world remains skeptical of the idea of adopting blockchain into mainstream financial services.

Blockchain and the global financial systems

Corporate finance is already edging towards the known technology, Chowdhury said. “In 2015-2016 HashCash made the first blockchain-based transaction between two major global banks in the area of remittances.”

“It is not that major banks are not working on blockchain, some of them are heavily invested in blockchain technology, some of them have done projects even taking them to live.” He added that “ some of them have done it quietly, some of them are using blockchain but are not talking about it, and there are also people who don’t do much but talk about it a lot.”

For Chowdhury, blockchain represents a revolution for the current financial system. When asked to assess the rate of blockchain adoption by financial institutions, he said he believes that the wind of change is too strong.

He went as far as to suggest that blockchain technology will lay the foundation of next-generation financial services that will force big financial institutions to join the tide, or compromise their market competitiveness.

Big players adopting blockchain

Resistance and skepticism towards blockchain do not only stem from the fear of the unknown, Chowdhury told MWN.

The high level of transparency and middlemen-free transactions go against the contemporary business model of financial institutions. “The banks or any incumbent in the industry, they want to hold on to what they do, and usually they are not very pro-change,” Chowdhury argued.

“If I am holding in a space, I wouldn’t want to invite change, I wouldn’t want to cannibalize my own business, I want to stay where I am and I want that to last,” he added.

To underscore his point, Chowdhury referenced the recent evolution of oil companies and how they opposed the adoption of renewable energy forms, arguing that it would be unrealistic to believe that we can power the whole planet using green energy.

“British Petroleum (BP), is now saying ‘we love solar,’ they started by criticizing it (green energy) strongly,” he mused.

However, to Chowdhury, all attention is good attention, as even criticism and skepticism indicate that major players are indeed recognizing the momentum building around the technology. “They want to slow down the pace of change so that they have enough time to make the change internally and align themselves to it, so that’s the first step.”

Chowdhury points to what he considers a prime example of this phenomenon, Jamie Dimon; CEO of benchmark American bank JP Morgan. “He is a classic example, he said that crypto is the worst thing in the world, yet he recently announced that he started investing in the technology and that he is now ready for it.”