Public blockchain ‘broken’ to plug: Professor tells Congress

In a speech to Congress on Wednesday, a financial law professor told Congress that public blockchains are too “weak” to simulate trillions of dollars in real-world assets because they are too inefficient and cannot handle large transaction volumes.

“Crypto runs on permissionless public blockchains, and no tokens are required,” said Hilary Allen, a professor at the American University Washington College of Law, in a June 5 speech to the US House Financial Services Committee (HFSC).

Allen was one of a number of industry leaders invited to speak about the impact of RWAs on financial markets – she argued that public restrictions were not enough infrastructure.

“Blockchains suffer from insurmountable inefficiencies and operational flaws that make them unsuitable for supporting infrastructure for real-world assets.

Allen said she thought blockchain would be a “revolutionary” technology when she discovered it a decade ago, and how “limited and problematic” the infrastructure was before she eventually started learning from independent technologists.

“A permissionless public blockchain is ill-suited to most of the problems people are trying to solve,” says the self-described “serious financial futurist.”

Allen said public blockchains “can't handle massive amounts of transactions.”

However, there have been countless transfers of more than $1 billion on Bitcoin and Ethereum.

For example, a Bitcoin whale transferred $6 billion to a new address in a single transfer in March.

Allen said other ledgers and databases might be more suitable for tokenization, but he didn't make a case for either technology.

“We need to be very thoughtful about where tokenization is deployed,” Allen concluded.

Related: Tokenized asset market on public blockchains could hit $16T – RippleX VP

Allen's comments contrast with BlackRock CEO Larry Fink, who believes every stock and bond will eventually be indexed on the blockchain.

In March, BlackRock tokenized the BlackRock USD Institutional Digital Liquidity Fund on Ethereum. According to 21Shares analysts, the fund has already collected $462 million in assets.

Today, more than $1.53 billion in U.S. Treasuries have been issued on the blockchain.

As of March 2023, investment bank Citi estimates that US$4 trillion to US$5 trillion in RWAs will be certified on blockchain by 2030.

However, CT admits there are still challenges in building infrastructure and achieving widely adopted standards of interoperability.

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