Fidelity Investments CEO Embraces Bitcoin And Blockchain, Cites Challenges

Abigail Johnson, CEO and chairwoman at Fidelity Investments, called for more serious conversations about bitcoin and blockchain while addressing Consensus 2017 blockchain conference in New York City, according to MarketWatch.

Fidelity has tested bitcoin and blockchain, according to Johnson, including partnerships, venture investments and its own initiatives, but most of its experiments have hit a roadblock due to the emerging nature of the technology.

Four Challenges Cited

Johnson identified four problems for cryptocurrency to overcome to gain widespread adoption.

There are still unresolved technical issues. Bitcoin ledgers have been hacked on numerous occasion, delivering catastrophic losses. Privacy is also an issue that has to be overcome.

The fact that bitcoin is connected to a digital footprint makes bitcoin accounts targets for hackers. Investopedia referenced a report that North Korean hackers were behind the hacking of bitcoin wallets resulting in $80,000 in losses.

Johnson also said there is a regulatory problem since the pace of innovation is faster than regulators’ ability to keep up with it. Regulators may lack a “mental model” for understanding how to regulate the technology.

She encouraged the bitcoin community to establish an open dialog with regulators to address consumer interests and ensure blockchain technology achieves its full potential.

The open nature of bitcoin and other cryptocurrencies results in a control challenge, Johnson said. She said companies that create products on cryptocurrency platforms lack clarity on the path they can take or how they influence developers.

Private networks that are popular among financial companies on account of their focus on security lack clarity on control structures. This can result in difficult decision making and confusion.

The Human Problem

The last problem Johnson addressed was the human problem. She said the bitcoin community has to create use cases that drive clear benefits for institutions and individuals.

She noted that her team at Fidelity studied a bitcoin wallet and provided users with a recovery phrase used to recover the wallet contents.

The subjects of the experiment responded in three ways. They applied existing mental models like using the phrase for a single-use activation code or using it for password recovery, for creating new models or leaving the system completely.

One reason for the team’s response was the lack of enough use cases for cryptocurrencies.

Fidelity Steps Forward

Johnson said the Fidelity headquarters cafeteria has begun to accept bitcoin. An early bitcoin adopter in the office performed an experiment where he tried to use it the way he used traditional money. He was able to buy a drink, but not return it, a limitation that caused great frustration, highlighting the ways bitcoin is not yet making things easier for consumers on a daily basis.

The systems not only need to be technically better, but more user friendly, Johnson said.
Despite these concerns, Johnson said she was optimistic about the future of the technologies.

She said hopes bitcoin and blockchain succeed because they make it easier for more people to invest and to use financial services in a world where artificial intelligence and the Internet of Things are increasingly dominant.

Lester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments.