Blockchain could kill off the City of London and the taxes that pay for the NHS, warns McKinsey’s John Straw

By October 24, 2019Ethereum
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Blockchain could kill-off the City of London and the taxes that pay for the NHS, warns McKinsey's John Straw
Immutable 'smart contracts' recorded via blockchain and blockchain-style technologies could make the financial services sector redundant, argues Straw

Blockchain technologies such as Ethereum could render much of the financial services industry irrelevant, destroying the City of London and the NHS at a stroke.

That's the warning of McKinsey senior advisor John Straw, speaking at Computing's recent Cloud and Infrastructure Live event on Business 5.0.

"Let's say that somebody actually does produce a working blockchain peer-to-peer [financial] system. It'll be a lending system that actually scales, we won't need banks any more. So, at that point that we won't need banks.

"That means we'll have no central clearing houses, which means that they don't exist, and they don't therefore pay tax. So who's going to pay for the NHS?"

Taxes from the UK's financial services sector, which is overwhelmingly based in London, raised about £75 billion in 2017-18, according to accountants PwC [PDF]. That equates to just under 60 per cent of the £130 billion budget for health and social care in the same financial year.

And the loss of the City of London would also tip the UK into an even larger trade deficit, with financial services generating a large surplus for the UK in trade with the rest of the world.

Furthermore, added Straw, the tax generated by financial services would not simply be shifted to blockchain-based alternatives. "Blockchain makes transactions invisible to the taxman. That's why France and Germany have basically banned [Facebook's proposed cryptocurrency] Libra, and quite rightly so," added Straw. "Blockchain is a ‘democracy killer', in many regards."

The key to blockchain technologies like Ethereum, which makes them potentially very powerful, believes Straw, is their capability for independent parties to be able to create binding ‘smart contracts'.

"I believe that this is the fundamental basis of Business 5.0… transaction capabilities within minutes, automatic remittances, no escrow and the fact of the [low] cost of doing it manually, a virtual presence in the cloud - and no lawyers necessary, which is obviously a bit of a joy," said Straw.

"That I think is the foundation of Business 5.0 together with APIs."

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