After spending the first portion of his career in banking in Latin America, Stephan Krajcer came to a stark conclusion about the future of his industry. “Financial instruments,” he says, “should be born digital.”
Krajcer is the founder of Cuore Platform, which last year joined the Creative Destruction Lab, the accelerator program at U of T’s Rotman School of Management. Krajcer’s vision is to develop “smart contract” technology that will allow traditional banking transactions, such as mortgages, which typically require signatures on printed copies, to be completed entirely without paper. As Krajcer explains, his eight-person team is deconstructing the steps and figuring out how to digitize each one of them, especially for routine and universal transactions such as promissory notes.
Cuore’s nascent service is part of a poorly understood but potentially game-changing technology known as “blockchain.” Developed a decade ago to facilitate the trading of cryptocurrencies such as Bitcoin, blockchain’s premise is that much of the delay and cost can be edited out of financial transactions by recording them on “distributed ledgers.” These ledgers are a bit like shared spreadsheets on a Google drive, except that they record transactions in a way that is transparent, secure, constantly updated and unalterable. Encryption ensures that entries are tamper-proof.
Andreas Park, a finance professor at U of T Mississauga, says blockchain allows for people to exchange assets directly, without a bank or other broker. Take the case of a typical wire transfer to a relative in another country – a transaction that costs up to 10 per cent of the initial amount and may involve a delay of days. With blockchain, such transactions could become practically instantaneous, completely verifiable at both ends and far less expensive. As Park observes, blockchain raises difficult but important questions about the value of the institutional go-between.