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In Conversation with Colin Platt (CGP Consulting Limited)

In this conversation, Fund Recs COO Des O’Donohoe talks to Colin Platt of CGP Consulting about the trends in fund administration in Ireland and beyond.

They talk about the level of interest in asset management constructed either in part or entirely out of cryptocurrencies. But is there value in it? Watch the video now for Colin’s take. 

In Conversation with Colin Platt (CGP Consulting Limited)

Hosted by Des O'Donohoe

Video Transcription

Des O'Donohoe: Hi, everyone. Welcome to the Fund Recs HQ. Today I've got Mr Colin Platt in a studio with us. So, Colin, welcome.

Colin Platt: Thanks for having me on.

Des O'Donohoe: No problem at all. So what are we going to talk about? I know you are big into cryptocurrencies, blockchain.

Colin Platt: I'm going to give you one guess what we're talking about then.

Des O'Donohoe: Let's do it.

Colin Platt: I'm really curious to talk about what's going to happen in Ireland, Fund Admin as well. And I think we're going to talk about that a lot over the next couple of days as well.

Des O'Donohoe: Sure, cool. Okay. So there's a huge amount of hype at the moment around cryptocurrencies, for sure, but also for blockchain. I'll let you pick, dealer's choice, which one you want to go with?

Colin Platt: Well, I mean, from about a year ago to now, cryptocurrencies as an aggregate have gained something like $800 billion worth of value. I mean, that's not nothing.

Des O'Donohoe: It's pretty normal, right?

Colin Platt: Yeah. It's normal. Every market goes from $15 billion to $800 and some odd billion dollars in the space of a year, right?

Des O'Donohoe: Yeah. Brilliant. For the guys that are watching this, what is driving this like? I mean, this-

Colin Platt: Rampant speculation in the cryptocurrency side. An acknowledgement that there is an opportunity there. Now, whether we've outstripped where that really should be by any normal measure, but it's hard because there is no model to value these things.

Des O'Donohoe: Right. So I've been watching the whole blockchain space. I actually watched it at the start of it. And I saw a guy and he bought a pizza for X amount. And if he -

Colin Platt: Ten thousand Bitcoin.

Des O'Donohoe: And what would that be worth now?

Colin Platt: Well, a Bitcoin is worth about $15,000.

Des O'Donohoe: That's pretty expensive pizza.

Colin Platt: That's not a cheap pizza now.

Des O'Donohoe: No. It definitely is not. Your opinion, right, where is this going?

Colin Platt: Well, I think there's two themes here. First, a lot of people have made a lot of money out of cryptocurrencies. The Chicago Mercantile Exchange (CME), the Congressional Budget Office (CBO) in the U.S. have both started trading futures on Bitcoin. And they may expand that into other cryptocurrency assets. Now there's a really big trend there that you have a lot of wealthy people who need to invest their money. And there's a lot of interest into putting money into this thing. So it could be that we start talking about asset management. Going in, building funds that are constructed either in part or completely around cryptocurrencies. And I think that could change a lot of things, whether that really disrupts everything, I don't know. It may just be a new asset class that opens up new revenue opportunities for the traditional players who say, "Hey, we've got this emerging markets fund and why don't we throw something that's an emerging cryptocurrency in there?"

Des O'Donohoe: I suppose, the thing about the whole thing, right, is cryptocurrency. It is really new. It is, right?

Colin Platt: Yeah. Nine years old.

Des O'Donohoe: Is there a value in it? As a betting man, would you say, "Yeah, I would invest in that."

Colin Platt: I definitely think there is a value in it. Now, if you asked me whether the value today is representative of that value right now, I'd have a hard time answering that.

Des O'Donohoe: Do you think the speculation is just fueling too much about it and then it's going to be a bit of pullback?

Colin Platt: I mean, we've seen a bit of pullback from late December already. I mean, Bitcoin's down 15%. Some of the other ones are down more than that in a shorter space of time from when they peaked. They're very volatile markets. What I tell everybody, we have a show that talked about this, a podcast on a weekly basis. It's something where-

Des O'Donohoe: What's the podcast?

Colin Platt: The podcast is called Blockchain Insider. If you are investing, if you're thinking about putting money in and you're new to it, think of it as like I'm going to Vegas and this is the money I would put into my Vegas vacation.

Des O'Donohoe: Okay. Right. So it is that kind of loosely, Gd, who knows where this is going to go?

Colin Platt: It goes up and down 20% in a day.

Des O'Donohoe: Fine. That's the cryptocurrency part of it. Let's talk about the base elements here, which is really the blockchain element.

Colin Platt: The blockchain and distributed ledger technology is the winner.

Des O'Donohoe: Are you a believer, a non-believer? Educate me.

Colin Platt: I'm a big believer in it. Now, I think you led earlier and said, "Okay. There's a lot of hype around this." Absolutely. And a lot of people are talking about, "All right. The blockchain can solve world hunger and things." You just go this, "This is technology."

Des O'Donohoe: It's not a silver bullet.

Colin Platt: No, it's a fancy ledger. And it's good for some things. It's really bad for a lot of things. Now, we're still trying to hone on exactly what that is. When I started looking at this in my previous job working at a bank, what is this thing? Why does it matter? Will it impact us? Will we all lose our jobs tomorrow? And the answer is probably not. People haven't lost their jobs since I was doing that at a bank when I left in 2015. Now, the question is, will it ever change anything? And I think the answer is, yes, it'll probably take time and it probably won't be as dramatic. But really what's interesting about blockchain is there's so much force and so many people coalescing around it. Somebody put it succinctly, they said, "Blockchain doesn't solve the problem, blockchain makes people solve the problem." And a lot of those problems are things around automation. A lot of those things are around, how do we get together and hone in on how we sync these things? How do we make sure that the assets are in the right fund or they're in the right account at the right time? And blockchain does some of those things. And it could do some of those things really well if implemented correctly. Now that's not going to happen tomorrow.

Des O'Donohoe: And it's not. So the thing about it is, is there one base there that is going to solve? Is it Ethereum?

Colin Platt: I don't believe so, personally. I think it'll be a variety of different technologies that fit the different use cases they need to fit. And we've already seen people go from talking about Bitcoin as the one ledger that rules them all and is the only thing that matters to people.

Des O'Donohoe: It sounds like Lord of the Rings, doesn't it, really?

Colin Platt: It does, really. And they quickly realize that doesn't make sense. And Bitcoin solves what it tries to do very well. And that is how do I move money without any censorship? I want to pay something that otherwise my bank would tell me not to, or somebody else would tell me not to. In Bitcoin, you can send it wherever you want and it's all a bearer account. You can spin up as many accounts as you want all the time. We know you can't do that in the traditional sense.

Des O'Donohoe: I have a question on that. So I am trying to educate myself on blockchain technologies. One thing I've seen is that there's going to be a problem with transaction rates in terms of when the whole world starts using it, it's going to slow down. Exponentially, it's going to slow down. Thoughts?

Colin Platt: I think this goes back to that point as well. Is if everybody's using the same network, the same set of technologies, it doesn't work. If you look at how the Internet works, the Internet isn't a single network, it literally is interconnected networks. That's why we call it the Internet. I think you're going to see something similar in blockchains. Some of them will be slow, like Bitcoin. Some of them will be much faster because we say, "Well, we only really need 30 people sitting around the table looking at this." And maybe they're 30 fund administrators sitting around Dublin plugging numbers in together and making sure that we don't have the same asset in two accounts. If you only need 30 people to connect into that, that can be really quick. And if you start segmenting these things, you don't have a trillion transactions a second. You have maybe a few hundred and you can deal with that.

Des O'Donohoe: All right. Okay. So that certainly answers that side. Do you think there's going to be rivals coming in here? Are there already rivals?

Colin Platt: Well, there's tons. I mean, there's literally hundreds of billions of dollars worth of money being invested in a public space, hundreds of million dollars probably in the enterprise space right now. Unless you start to count all the money that doesn't really get counted into that, it's probably 10 times that. There will be lots of rivals. You already see in the enterprise space companies like R3, which is the consortium of a big financial institution.

Des O'Donohoe: That's been around a while.

Colin Platt: That's been around since 2014, 2015, depending on how you count. Digital asset that's working with ASX in Australia. You have IBM, who's involved in a ton of projects. You have chain.com based out in San Francisco, as well as some smaller companies that are looking at how I can solve a specific problem. Now, where that's really interesting is it's such a big field. We're talking about literally all of the financial transactions in the world that people go, "Does this fit in?" And if they can find a niche in that, yes, they're competing on a macro scale, but they're not really competing for each bit of business.

Des O'Donohoe: Last question for you. What is going to happen in 2018? What are you seeing? So we're in January. What is going to happen over the next six to 18 months? What do you expect to see in this space?

Colin Platt: Let's back that up a bit. 2016, I classify as the enterprise blockchain DLT movement really took off. People said, "Right, we can put this thing in. We can solve a lot of things with technology. Forget the cryptocurrency." 2017 was 100% about the cryptocurrency. It was about Ethereum, ICOs in the first part of the year where people were using new tokens built on top of Ethereum to raise ungodly sums of money, culminating with companies raising a quarter of a billion dollars towards the end of 2017 to Bitcoin going from less than $1,000 up to $20,000 at one point just before Christmas. I think we're going to transition and say, "Well, 2018's where cryptocurrencies start to find their niche, enterprises start to come alive." Because a lot of these budgets that people started putting down in 2015, 2016 are going to start demanding results.

Colin Platt: And they're not going to be the big, fancy things where we say, right, all of a sudden the Bank of England has said, "We're putting everything into a blockchain." That's not going to happen. But we're going to start seeing things like people saying, "Well, let's send messages over here and reconcile them on who holds what." And we're starting to see that. Vanguard came out with something so long ago where they said, "We're working with a startup and we're actually putting this into production." We're starting to see that with banks in the UK, where they say, "Hey, we just want to reconcile some of our payments today on our faster payment system." Those are small use cases, but those are the things that start to be the building blocks that make those big ones possible.

Des O'Donohoe: They shape the future, don't they?

Colin Platt: They do.

Des O'Donohoe: Colin, absolute pleasure having you in. Thank you.

Colin Platt: Thank you.

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