Greg Medcraft returns to Australia with a warning from the blockchain revolution

As leader of the OECD’s financial services directorate for the past three-and-a-half years, Medcraft made digital finance policy his key priority.

His time in Paris has confirmed for Medcraft that financial services are on the cusp of profound transformation.

The OECD will publish a report on DeFi soon, describing the potential for a wide range of financial services to be provided by automated computer protocols.

About $US60 billion ($81 billion) is currently invested in various DeFi projects, according to analysis and rankings website DeFi Pulse; the three-biggest – Aave, InstaDapp and Compound – involve lending against cryptocurrencies pledged as security.

Blockchain business models can reduce costs and make markets more transparent, but, as OECD’s extensive policy work on blockchain shows, many new challenges will arise.

The arrival of mainstream central bank digital currencies (CBDCs), which will enable DeFi, are perhaps five years away, he predicts, while the emergence of the new internet-based finance system is probably an issue for the 2030s.

Like other jurisdictions, Australia is grappling with digital finance policy.

The Senate Select Committee on Australia as a Technology and Financial Centre is considering new policies that will provide certainty on how blockchain-based finance projects can be created safely; dozens of submissions have been made over the past few weeks.

“Digital currencies and digital identity are an important part of enabling DeFi, and once you have these, you essentially have the missing pieces.

During his time at the OECD, Medcraft oversaw policy work on a wide range of areas, including corporate governance, anti-corruption, competition, consumer protection, capital and financial markets, pensions and insurance.

He’s proud of his directorate’s work connecting ESG principles to International Financial Reporting Standards, and projects on infrastructure funding but he considers the work on blockchain and digital finance as the most important.

Former finance minister Mathias Cormann joined the OECD as Secretary-general in June, and Medcraft says Cormann was keen for him to stay on, but COVID-19 made it impossible to commute.

He’s keeping his options back at home close to his chest, but says he’s interested to do something in the finance sector