Xero CEO: It is impossible for banks to implement an immutable blockchain network

Rod Drury, CEO of multi-billion-dollar New Zealand-based software and auditing services provider Xero, recently told Cointelegraph that the private blockchain networks currently being developed by banks and financial institutions are essentially a solution to a ‘problem in the wild’.

Is a private blockchain necessary?

The rationale for banks and financial institutions to develop private blockchain networks and platforms is that strict international and foreign financial regulations do not allow for the deployment of decentralized networks.

The main reason for most current regulatory frameworks is that governments and central banks want to maintain an absolute monopoly over financial data, transactions and private information.

As a result, Xero CEO Rod Drury described the financial industry as a 'surveillance culture' that exhibits a 'corporate' mentality.

Drury is one of the few people in the industry who understands that private blockchain networks operate more or less like traditional SQL databases, in the sense that governments and law enforcement will have a complete monopoly on transactions settled on bank-backed blockchain networks.

If the blockchain cannot demonstrate the characteristics and functions of an immutable and indisputable ledger, then it will be no different from the existing traditional financial system.

Drury said:

“I think mathematically it’s very fascinating, but I think the nature of the world right now — the surveillance culture and the collectivism — means that a distributed money supply is impossible.”

A solution to the 'find the problem'

One piece of advice that venture capital firms, accelerators and angel investors give to startups and entrepreneurs is that the importance of creating a technology, product or service is to find a solution to a real problem.

Banks and financial institutions created blockchain initially to counter Bitcoin. The goal was to create a replica of Bitcoin, not to maximize the interests of users, but to increase profits and reduce costs for banks in the cross-border payment settlement process.

“Blockchain is a very good ‘solution in search of a problem.’ We are always evaluating the technology… never say ‘definitely,’ but we are probably waiting for someone to come up with a good application that we can use.”

Centralization vs. Decentralization

Drury further stressed that it would be nearly impossible for banks to implement immutable blockchain networks or any technology that would provide even a modicum of decentralization under existing regulations and policies.

Drury added:

“We’ve seen some issues with blockchain, but when it comes to money, it becomes a centralization issue.”