Blockchain is finding a home in supply chain management. According to ex-JP Morgan exec Blythe Masters, hundreds of new blockchain supply chain projects could be coming to the global commodity markets. Ms. Masters told a private London Metals Exchange (LME) conference in London that “Supply chains are notoriously complex and inefficient.”
There has been little progress in streamlining complex supply chains, but as the recent launch of IBM’s Food Trust demonstrates, that could be changing. Blythe Masters launched her own company, called Digital Asset Holdings, after leaving JP Morgan. Digital Asset Holdings is working on blockchain-based solutions for the metals industry, in addition to other projects.
Unlike many forms of financial trading, the LME still relies on open outcry trading to set metals prices for the Western financial system. In addition to precious metals pricing, the LME also fixes prices for industrial metals. Most metals are easy to trace, but in the case of some Rare Earth Elements (REEs), and minor metals like cobalt, their origin has become an issue.
Blythe Masters Probably has it Nailed, Again
Blythe Masters’ Digital Asset Holdings was founded back in 2014. While she has benefited from the massive rise in crypto prices, Ms. Masters thinks that blockchain could get a whole lot bigger.
Earlier this year, she told CoinDesk that,
“The application of this technology is by no means limited to the world’s biggest market infrastructures,” and added, “It goes well throughout financial services, well beyond capital markets and beyond financial services into all the other industries that have a vested interest in improving the efficiency of their workflow orchestration.”
The last few months have seen some big players enter the blockchain space. Now there are working platforms that can manage an international shipment, and also track complex food distribution networks. Tracking industrial commodities makes sense for blockchain, and major miners could benefit from a more transparent spot pricing mechanism.
Establishing an Early Track Record
Governments in the USA and EU have been slow to adopt blockchain or open up to cryptos. This isn’t the case in Australia, where Digital Asset Holdings was brought in to help revamp the settlement system for the Australian Stock Exchange.
According to Blythe Masters, “I think there was some fair criticism that blockchain was a technology solution looking for a problem to solve,” but her company takes an open minded approach to any blockchain build-out. To wit, “… our approach has very much been to work with customers to identify the problem first and sometimes not to recommend a DLT solution,” she told CoinDesk.
In the industrial metals market, establishing both a firm chain-of-custody, and a smooth pricing mechanism could be a big benefit for everyone in the sector. The LME has been the subject of criticism over the last few years, as much of the cobalt they broker is thought to come from areas like the Democratic Republic of the Congo (DRC).
Better Oversight at all Levels
Until lithium batteries became popular as a result of smartphone technology, and electric vehicles, there was only a small market for elements like cobalt, coltan and REEs. Not that everyone has a smartphone and wants a Tesla, the market for these once unheard of elements has exploded.
Over the last few years more than 60% of the world’s cobalt supply has come from the DRC. Unfortunately much of this metal is believed to come from unofficial sources, or in other words, child miners working at gun-point. The LME has been unable to establish firm chain-of-custody for some minor metals, but blockchain could be a solution that benefits the entire industry.
Ms. Masters predicted that,
“It won’t be until the kind of controls you routinely expect around transactions and post-trade processing of a stock or bond today can also be produced for the transaction of a tokenized instrument – whether it’s a stock or a bond or a cryptocurrency – that we will see widespread enterprise adoption of tokenized instruments that rely on public chain technologies.”
Now, a few months later, it appears that using a blockchain platform will be required for anyone who wants to sell Walmart veggies going forward. There is no way to know when an industry standard blockchain platform will hit the global metals markets, but the arguments that blockchain will be slow to develop, or implement, seems weaker all the time.