Q&A with Mohamed El-Masri: Blockchain and investment
In this Q&A session with Mohamed El-Masri, founder and chief executive officer of PermianChain Technologies, we discuss the investment opportunities that the blockchain creates and how the sector can polish its reputation if governments and regulators start to play a proactive, positive role.
Q. How can the transparency of blockchain enhance the way that we invest?
The blockchain’s transparency makes it simple for investors to track asset performance and understand activities and their ramifications across a broad portfolio of investments. In a well-managed blockchain environment, everyone with the correct level of access can see what part of a process has been reached and what needs to be done to move it to the next stage. From an investment perspective, this makes it more simple to gauge how long it might be before an investment bears fruit.
At the same time, the blockchain means that there is less need for brokers and administrative teams. However, registered broker-dealers are necessary to ensure compliance with regulations when it comes to issuance of digital securities.
Generally, there are fewer hoops for data to travel through, and this data can be automatically converted into actionable information as it makes its way through the process, so again, it’s quicker and cheaper for investors to be involved in a well-managed blockchain platform than it is for them to be involved in a traditional investment offering.
It also means that it is much easier for regulators to ensure that societies receive what they are due, automatically, so potential investors don’t need to worry as much about changing policies in specific jurisdictions as these policies can be applied to a blockchain smart contract and enforced by default.
Q. How do we give potential investors the confidence to participate in the blockchain?
Transparency is going to be key. The blockchain has faced two key challenges over the last few years.
The first are the technical challenges. Some of these are significant, but none of them are insurmountable with the right strategies and support. They vary from project to project but as more and more blockchain projects succeed, knowledge will spread.
The other challenge is more difficult. The reputation of cryptocurrencies has, rightly or wrongly, taken a bit of a battering over the last couple of years. There is little doubt that the sector has attracted a range of scams that have left some investors out of pocket. This has had an impact on blockchain, which is virtually synonymous with cryptocurrencies for the majority of people. Regulators and institutional investors will continue to play a role in rebuilding confidence in the sector.
Q. How could governments and regulators play a more active role?
The lack of confidence in the blockchain is exacerbated by the stance taken by many governments, who have seen the rise of crypto as a potential threat, rather than something that can be used to enhance existing governance (and even revenue collection). There are governments around the world that have taken a more positive position, but up to now these have very much been in the minority.
This may only be a relatively short-term issue, however. As blockchain projects start to deliver stable returns, it is unlikely to take long for regulators to take an interest, and because the majority of well-developed projects will be transparent to the core, there is unlikely to be a significant challenge in giving regulators and potential investors a clear view of revenue, risk and reward.
Once governments and their regulators are more at their ease, investors are likely to become more comfortable, so yes, ultimately governments and regulators should play a role in the sector, setting standards, encouraging professionalism and helping give innovative projects the best chance to succeed.
Q. If governments and regulators take a more active role, won’t that mean that they will take a cut of profits and reduce the viability of some projects?
The key point, as with any investment, is that returns are more likely to be both realistic and actually realised if regulators take an interest in the level of risk that a project represents and investors do their own due diligence. In the blockchain investment space, as in any form of investment, if it sounds too good to be true, you probably need to do some more due diligence.
Having a more active regulatory role would potentially mean that they would take an increased financial interest in a project in terms of tax revenue expectations, but if a project is genuinely viable, then it should be able to factor in regulatory interest and the expenses that come along with regulatory oversight.
Ultimately, if investors see that regulators and governments are playing an active role in overseeing a project, then they are more likely to have the confidence to invest. One of the many benefits of the blockchain is that it makes it possible to attract multiple small investors to a project but that level of investor tends to be the worst hit if a project is built on poor foundations. It is important for a project’s credibility that it enjoys regulatory oversight.
In the end, a more active role from governments and regulators will give people the confidence to invest and help more viable projects succeed. It would be a major step towards the blockchain living up to its potential and becoming a catalyst for innovation.
PermianChain Technologies is a pioneer member of the Blockchain Research Institute and a startup member of the Petroleum Technology Alliance Canada (PTAC). PermianChain is investigating ways to harness the power of blockchain technology, data science and artificial intelligence to digitize, tokenize and monetize proven but undeveloped natural resources, starting with oil and gas. The PermianChain, which already has secured oil and gas reserves to be listed on its platform, intends to unlock liquidity to revolutionise the way that oil and gas reserves are funded, produced, bought and sold on a permissioned-access blockchain. The firm is currently in the process of applying to for its regulated digital securities trading and investment platform.