The chairman of Roubini Macro Associates also took apart some of the arguments put forward by blockchain proponents. He said because blockchains require all transactions to be verified cryptographically, they are often slower than traditional processes.
Roubini also said it’s unlikely that blockchain technology would be able to eliminate financial intermediaries, as many have claimed. Advocates of the technology have said that the decentralized nature of the way transactions are verified could wipe out people in the middle of the movement of money, something Roubini disagrees with.
“This is absurd for a simple reason: Every financial contract in existence today can either be modified or deliberately breached by the participating parties. Automating away these possibilities with rigid ‘trustless’ terms is commercially non-viable, not least because it would require all financial agreements to be cash collateralized at 100 percent, which is insane from a cost-of-capital perspective,” Roubini said.
“Moreover, it turns out that many likely appropriate applications of blockchain in finance — such as in securitization or supply-chain monitoring — will require intermediaries after all, because there will inevitably be circumstances where unforeseen contingencies arise, demanding the exercise of discretion.”
Roubini said that Ethereum is “vulnerable to manipulation by influential insiders” and Ripple’s technology won’t replace the current system from cross-border money transfers between financial institutions called SWIFT.