Blythe Masters: Wall Street has more advantages than blockchain startups

Blythe Masters, CEO of Digital Asset Holdings, discussed the potential business impact of blockchain technology at an event.

Hosted by PricewaterhouseCoopers (PwC), the event left no stone unturned in laying out the risks facing financial incumbents who do not take any steps to investigate the potential application of blockchain technology in their operations.

She also reminded the audience that by taking a “wait and see” approach to technology, some financial institutions are at risk of being left behind.

Masters told the audience:

“The fact is if your competitors have managed to exploit the technology before you fully understand or deploy it, then the entire business model is at risk of being disintermediated.”

Despite this, she still believes that startups are unlikely to disrupt many large companies because of their size and market scope, and she also believes that the technology is integrating existing institutions in the industry.

“The advantage of being an experienced person versus a novice is that the economies of scale are huge,” she said.

Masters also discussed her reasons for leaving JPMorgan to join blockchain startup Digital Asset Holdings, dispelling inaccurate rumors about the reasons for her departure.

Masters joined Digital Asset in 2014 as a board member and became CEO in March 2015. The company has raised more than $60 million in funding and addresses industry challenges including regulatory reform and capital requirements, operational risk, systemic risk and cyber risk.

Becoming the CEO of a company with ties to bitcoin was not something she or anyone else could have foreseen, Masters said.

“What I said to myself was that I would not agree to take on any board work that might end up conflicting with the day-to-day work,” she said, adding:

“I am making an exception to stay at Digital Asset Holding because it is unlikely to be a conflict forever, and I will always work in the technology sector, especially in relation to Bitcoin.”

Abstracting Bitcoin

Prior to Masters’ speech, Amal Aly, Director of Financial Services Advisory at PricewaterhouseCoopers, introduced the concept of blockchain technology. She explained the current ecosystem based on how financial information is fragmented and isolated.

“It takes a lot of time to reconcile matching information,” she said. “Each party to the same transaction keeps separate records because we don’t trust the other parties involved.”

However, with the development of blockchain technology, this is no longer necessary. “By creating a shared, distributed ledger, blockchain automates trust,” she said, emphasizing that “blockchain is the technology behind the bitcoin cryptography, but it is not bitcoin.”

Masters read a lot of newspaper articles to better understand the opportunities presented by the underlying technology of Bitcoin.

“I haven’t specifically read the supplemental articles in the newspaper, which are generally about undesirable activity,” she said. “However, what’s interesting is that if you abstract from all that and think about the problem that Bitcoin is trying to solve, it turns out to be a very interesting problem with implications for financial infrastructure.”

Fundamentally, what the technology allows for is an untrustworthy environment, she said.

Masters believes that the problem Bitcoin is designed to solve is to "create a network where two parties are unaware of each other and can exchange value between each other."

She explained that once Bitcoin is abstracted from the equation, what remains is a system in which parties can exchange value while being able to be confident that the project is not fake or forged.

“Blockchain disappeared in the discussion because Bitcoin was proposed by people who wanted to see the end of financial institutions and they didn’t want government intervention,” Masters said.

A male-dominated world

Masters concluded by saying she believes finance is a male-dominated field and recounted her story of how she rose through the ranks of JPMorgan Chase to become the leader of a well-funded blockchain company.

“There are strengths and weaknesses for being a woman in this field in the context of a male-dominated industry,” she said. “In the long run, at least for me, the challenge is to be able to balance those strengths and weaknesses and recognize that they are part of the environment, learn to live with it and use it.”

She went on to point out that male colleagues might have been able to get away with it when it came time to take action, but she was told not to be “so aggressive.”

Nonetheless, being both a mother and a working woman is a challenge that CEOs currently face.