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After 10 Years of Working With Blockchain, Deloitte is In Position To Help Enterprises on DLT Plans

The way Deloitte Blockchain Practice Leader Rob Massey tells the story, there weren't a whole lot of enterprises interested in distributed ledger technology a decade ago. But despite Deloitte's reputation for working with enterprises, the consultancy took on smaller blockchain projects and startups because it had an idea of blockchain's disruptive potential and wanted to be in position for when enterprise interest in DLT started to ramp. Ten years later, Massey knows of very few enterprises that aren't involved with blockchain in some capacity and Deloitte has been helping many of them to jumpstart their DLT strategies (full-text interview appears below).

World Economic Forum

DLT Strategy

By David Berlind
Published:January 18, 2023

Audio-Only Podcast

How can a big IT consultancy help enterprises with blockchain?

David Berlind: I'm David Berlind with Blockchain Journal. I'm coming to you from Davos, Switzerland, where right now the World Economic Forum 2023 is in full swing. I'm in our studios, which are located right on the main promenade that leads to the Congress center where the event is taking place. And I'm looking for really great Blockchain stories, especially enterprise blockchain stories to tell. And one of those is going to be coming from my guest today who is Rob Massey. He is the leader of the Blockchain and Digital Asset practice at Deloitte. And Deloitte has been around for how long?

Rob Massey: We crossed the 175-year mark during the era of COVID. So we must be at 177 by now. Long time.

Berlind: Wow. So you're old school.

Massey: We are old school, big firm.

Berlind: But you are the head, you're leading the blockchain practice. The idea that it even has a blockchain practice is exciting. You're the leader of that practice there. How long have you been doing that for?

Massey: So 10 years ago we started serving clients in this space. It did start with tax. We now have, we serve across all of the functions now. So we do audit in this space. We have a large consulting practice. We build stuff, we build Blockchain applications. We also have a large advisory practice. And so it's full competency. I was the first one in tax. And so now I'm one of the four leaders that span our firm that serve collaboratively across all the different business models that we encounter.

Berlind: And without naming names, you definitely deal with the big enterprises out there in terms of providing all sorts of IT services and helping them to figure out what technology to use to solve the next big challenges coming along.

Massey: A hundred percent. So going into tech, in normal time advising companies, what do you do with this, what kind of technologies should you consider, and so Blockchain is increasingly one of those questions. And so our deep technologists in the firm have a strong point of view about what Blockchain does, what it doesn't do, and how do digital assets enter that form as well. And so, and interestingly, it's hard to make that decision in a silo. You need to think about, not just from a technology standpoint, but what about the regulatory frameworks? What do we do in there? What about the legal implications? How about accounting? What about tax? And so approaching it from a broad perspective helps companies make more informed decisions.

Berlind: For sure. And just to be clear, I saw you speaking in front of a big group with Elizabeth Carpenter, who is the chief operating officer of Circle, the Stablecoin guys. And you were talking about how, when you are approaching a client, it's not about the client being really enamored with the technology of Blockchain or anything like that. It's more about, what are the problems that they need to solve, and then to which part of that problem does Blockchain apply? Is that the approach you guys are really taking with all of your clients?

Massey: For sure. Ask yourself first, when you have any problem in an enterprise and you're thinking about the different possible solutions out there, there's a lot of misconceptions about what blockchain does and what it doesn't to do. And by the way, there's a lot of different blockchain applications.

Berlind: For sure.

Massey: And still a lot of experimentation. We've now got over a decade of history with people experimenting and there's still a lot of questions and a lot of new advances being made. And so taking a deep dive into what it does and doesn't do, and then having sensitivities as to how complicated it is to build on a blockchain protocol versus normal technology.

Berlind: And so you said that there are a lot of people, maybe within Deloitte, but also in your client base that have their perceptions for what blockchain is. Are they right, are they wrong? Do you have to sit them down and educate them? How does that process work?

Massey: It is only when you think about the transaction types that they want to execute or how they want to execute them, where they want to execute them, that you really understand is it the right or wrong thing to do. So there's so many different types of blockchain protocols out there, public permissioned, quasi permissioned. There's different digital asset times. And so to start with a broad category and say, "What are we trying to solve? Now let's iterate." And then with our experience, you don't have to, you're not starting from scratch. We've got best practices we've developed, we've seen trends, we've seen other people experiment. So while we're not going to tell you what to do, we're going to give you maybe a more thoughtful array of options and considerations.

Berlind: You maybe see me grinning because when I watched you speak with Elizabeth in front of all those people, you talked about how you've been doing this for 10 years, and at the beginning there, you weren't exactly working with enterprise. There wasn't a lot of awareness of enterprises, but you felt like the importance of working with a lot of these smaller startups and smaller companies that were interested in blockchain is what got you to a place today that enables Deloitte to really do a great job servicing its enterprise customers. So talk a little bit about that.

Massey: It's definitely been a big component of our strategy. And hindsight's always 2020, this was a good move. This was us starting with a lot of early stage, I'll call them early stage disruptors, and they're like, "Okay, we can do that, but better and let's test this out." And so we serve across the entire ecosystem, which is important to us, because you don't understand how one component works until you understand all of the rest of the infrastructure and providers around it. So very early stage protocol launches, DAOs, we work with funds and investors. So when we serve –

Berlind: Just for those people at our enterprise who don't know what a DAO is, what?

Massey: Decentralized autonomous organizations, which is, we could spend an hour on those, but –

Berlind: Little rabbit hole there.

Massey: But we, until you actually are deeply ingrained in that, and not studying it from an academic perspective, but actually working with it, crossing through technology and different regulatory considerations, only then do you feel like, "Okay, I know what that is," so that when I do have a large enterprise, that may be thinking about engaging with the dower, they're curious, we can answer their questions at a very deep level. Because I have been personally very surprised by the level of engagement by the biggest companies on the planet saying, "Hey, we're reading about these DAO's, we're thinking about it. Can we have a real dialogue about how we might at some point engage with one or start one? Fascinating, because they're watching this evolution and how, they're watching the incredibly impactful, transformative nature of Blockchain applications. And as we span into different types and new types of digital assets and DeFi and DAO's, it's fascinating how enterprises are really thinking, "This could be next. Let's experiment with this a little bit, cautiously."

Berlind: What's driving them? Are they fearful that they're going to get disrupted or are they seeing a new market opportunity because Blockchain enables something that previous technologies couldn't enable?

Massey: I think it's a bit of both. There is a level of innovation that exists in most companies out there, even those that claim to be, no, they're very staunchly conservative, and then you talk to them for a minute and you find out that they've had skunk works in the back room for a decade, that's pretty cool. And they're pretty advanced. And so I think that it's just become inherent in most large enterprise. You can read about those that didn't think about disrupting themselves and then they're gone. And so I think this is a common theme now among companies. We just need to be on the, thinking about it, don't do anything dangerous, but just keep stuff in the works. And so this level of experimentation cautiously, I think is a common theme, it crosses every industry.

Berlind: How many enterprises are showing interest, in general. What percentage of your clients?

Massey: Most, if not all, are at least interested. Now, how far along the journey they are, there's a wide range, but I talk to our partners a lot in saying, "This is not asking your client, 'Are you thinking about this?' The question is, who in your organization is thinking about this right now? Who is the lead? Who is on point?"

Berlind: And so is that more the skunk works people who are just experimenting with that or are some of the drivers coming from the CXO's?

Massey: Absolutely. It comes from the board asking the questions. It comes from the C-suite. It comes sometimes from the CXO's. The CIO's, I think is the area of focus here. Sometimes, it's technology focus. A lot of the times, it is someone leading the charge from a strategy perspective or thinking about new business models or new commercial activities saying, "Is there something here that enables us to connect with customers differently? Can we do things more efficiently? Can we bring more transparency?" Transparency is a big deal these days. When you talk about sustainability, which is a really big topic at Davos, blockchain uniquely qualified as a technology to bring new elements of transparency to investors and customers.

Berlind: Right, there's a lot of stakeholders around any given enter enterprise. You've got the customers, you've got stockholders, you've got people who work there. Blockchain in some way, as a single source of truth and very public and transparent, offers some transparency around what they're doing from a sustainability point of view.

Massey: A hundred percent.

Berlind: And yeah, so that's a really good thing.

Massey: And an ability to architect, such that you can be transparent in ways that are meaningful, but you don't have to necessarily give up everything. And so I think the architecture of how you design not only what protocol you work with, but how you design your level of engagement, there's a way to be thoughtful as enterprise.

Berlind: You mentioned CIO's, but when I first started going down the Blockchain rabbit hole myself, I realized that I might have to self-educate my myself in international finance. I was coming across all these financial terminology that was really important. And I suddenly realized that all of the work, all of what's going on, not only on the financial side of things like the procurement of a blockchain is very different than procurement of any other technology.

You have these public blockchains that are out there and you just engage them in a very coin operated fashion. There's no software contract or anything like that. That actually is disruptive to the TCO, the total cost of ownership of IT in general, which would be of interest to the CFO. CFO is always looking to either drive more profitability or reduce costs. There's an opportunity for that here, but then comes in the element of, in order to work with a chain in a coin operated fashion, you have to develop some smarts around the cryptocurrency that runs on that chain 'cause that's how the fees are paid.

Massey: That's right.

Berlind: What have you encountered on the CFO front? Because now, okay, that's a little bit different. Just like I need a pile of quarters in my hand to operate a laundry machine in a laundromat, now I need a small pile of cryptocurrency to pay the fees of any given chain I choose to work with. That's different for a CFO to have cryptocurrencies in reserve. And they're also, I would say, probably some compliance issues that come up when it comes to that, so this is not just a CIO thing, it touches on the CFO, it touches in terms of whoever's in charge of compliance. Is this an area that you have to develop a lot of expertise in to help your clients?

Massey: There was a lot in what you just said. Let me unpack it a little bit. So first of all, I'll start where you finished and that is absolutely, this is a topic that crosses every competency in an organization, because it's new for everyone. So you can't assume that your buddy across the hall, you can't assume that, "Oh yeah, I know what he does. So this is where I'm in my silo. I know how he treats it so I know what to do with it." No. You have to listen to make sure we really understand how it's different for everybody involved. So when we have put strategy sessions or design sessions on this, it's a lot of the organization. It hits across finance, it hits across strategy, it hits across tech. It's tax. It's all about –

Berlind: Legal.

Massey: Legal. There's massive KYC AML considerations in here.

Berlind: Know your customer.

Massey: Know your customer, and money laundering. Yeah, yeah, no big considerations there. So it ends up being a larger group than you would normally use to strategize, but you have to listen to one another because as they're absorbing what is different for them, you have to have that sensitivity because you're going to find a roadblock and then you have to revector until you find a way to design something that works for everybody because it's just different for all. So that is one area that this is absolutely critical.

You spoke about supply chain, which is absolutely an area of focus here. And the level of interest in supply chain scenarios reimagined on Blockchain is very common and spanning from permissionless chains to permission chains, which is really where people start most, there's not always a ton of transparency between vendors in a relationship, and that tends to be a massive consideration because not uncommon if you design something that would give too much transparency and if you're still charging people through the chain, you got to be careful of what that is. To your point, none of the protocols work on magic beans. There's usually incentives and there's fees to actually execute transactions. That does normally involve some store of a digital asset, which is usually a native digital asset to that protocol, which means that someone needs to have them to pay the fees.

Berlind: So just to be clear, for our audience who's coming up to speed on all of this stuff, you're talking about, if you're going to be running on Ethereum, you need [inaudible 00:13:25]. If you're going to –

Massey: That's right.

Berlind: Whatever the Bitcoin, you need some BTCA.

Massey: You have to have them, and that's one of the considerations. It may or may not take a lot of it. The one consideration of many, I guess, paying the fees is one thing and having a store of those to pay them, and yes, they are volatile. They do move in price, and so that's the sensitivity. It may not be material to the organization. It may be just a supply you use. That may be the case. Increasingly, what happens though, particularly when they engage in public protocols, is that many of these protocols have a voting mechanism. So different than when you engage with software and there's humans and an enterprise on the other side that you can interact with that says, "Okay, here's the next version. Do these new upgrades work for you?" In a public chain, those things don't exist, but there are mechanisms for people to express opinions about proposals.

Berlind: Governance tokens.

Massey: And vote. There are governance tokens. Even those protocols without governance tokens, they're mechanisms for the community to discuss what they like and what they don't like. And so frequently what happens is, unless you hold the store of tokens, you may not have a vote, which this is the new journey for the CIO's saying, "Okay, we're going to build something. We're going to invest to build an application, and we're going to really elevate our commercial activities now in a protocol that we don't control. And really nobody does." That can make people nervous. It frequently makes people nervous.

Berlind: But are they comfortable with that from everything from TCP/IP to HTDP, these are all open protocols where they didn't really have much of a vote?

Massey: For sure. But I think the direction of these changes in a way that's perhaps a bit more drastic, and so you want to have a say in what it is. First of all, you need to know what is that community? Where is it going? Do I feel okay with the people that actually control it? They're humans somewhere. Do I feel comfortable that we can actually build new commercial activities on that in the direction it's going? That's question one. Then, how do we want to engage with it on a prospective basis so that we can express an opinion and it will be heard? So that sometimes involves just being a part of the community. It's really engaging with their discord channel. That is different. That's very different than picking up the phone and calling the technology vendor saying, "Hey, this upgrade, we're not [inaudible 00:15:44]."

Berlind: You were able to do that before because you had a software contract and it entitled you to certain access that you don't have now, right?

Massey: A hundred percent. A hundred percent. It's a new way of thinking. That can be scary for some, or if you see, it is so valuable that we use this technology that we now need to think about who in my technology group needs to actually engage thoughtfully and have a role and a voice in engaging with that community to make sure we get what we want.

Berlind: It's somewhat reminiscent of open source. Remember the first days of open source?

Massey: Sure.

Berlind: There was a lot of barriers in enterprises to work with something that was developed in an open source fashion. That was insane, and of course you had companies out there, tech companies who built proprietary software who were telling them, "This is insane," but look where we are today. So when you get in, going back to the cross-disciplinary aspect of this, have you shown up with, in an enterprise where there's a skunkworks, you mentioned skunkworks, where there's a skunkworks project going on and it's skunkworks, so the people like the CFO and the others who would care about compliance don't actually know that's happening and suddenly they're out of compliance or they didn't realize they were doing something that could be dangerous to the company, and you have to reset and say, "Okay, wait a minute. Full stop."

Massey: Yeah. It does happen, because not everybody's going to be in there from the beginning, but this is where, for the first time maybe ever, the tax guy is at the table very, very early, which is super fun. That's how I'm engaged in this space, is just because we iterate together. And so it's usually, to your point, someone at a pretty high level saying, "This thing you guys are experimenting with, this could have some legs. Let's expand the group," and then someone at a level of authority then inspires everyone to get involved. And the key is to make sure that you are one step ahead, because you do not want to be flatfooted when you get that question from your authority, whoever it is, someone in the C-suite that says, "Hey, you need to pay attention to this." If you've never been exposed to it before, that can be a little bit scary.

Berlind: You said, "This thing looks like it has some legs." There are a lot of barriers to Blockchain adoption in the enterprise. Regulatory, just the complexity of holding crypto and all that stuff. How do you determine, how does an enterprise determine, or how do you help enterprises determine, "Hey, here's an opportunity," and that opportunity is so big, it's worth overcoming all the various barriers to using the technology in the first place?

Massey: Well, their decision to engage or not, what we do is help them, one, identify the considerations, the caution flags, if you will, or if something seems really valuable to them and they're like, "We got this mountain of problems. Can you help us deal with it," that's where we come in, helping them evaluate, "Can you surmount to it or not?" And then it's a constant state of reevaluation, "Okay, here's what we need to do to solve it, and we're going to be really truthful about that. It is not easy." Now go back and say, "What is the impact on the enterprise? Is it worth it?"

And I think it's a constant state of reevaluation. You always have to ask yourself the question, "That's a pretty steep hill. Is it worth it to climb that thing?" And it's not an easy question, and you don't always know at the beginning. You have to keep asking it along the journey. And to your point, those considerations span pretty much everything out there. I get involved most deeply from a tax perspective. There's a lot of really interesting questions in tax that not only impact the enterprise, but also could be their vendors, could be their customers, could be their investors.

Berlind: When you were talking with Elizabeth Carpenter over at Circle, she used a phrase that I'm stealing. She called it the regulatory perimeter. So how difficult is it, or how important is it for enterprises to keep a really close watch on that regulatory perimeters at shifts and to adjust accordingly?

Massey: Yeah. Well, the regulatory considerations are vast and not just in the US, but around the world. And they do span, as you've said, securities law. We don't practice securities law in the US, but that that's a big one. But they span many other agencies, including we talked about KYC AML, which is the consideration of many. The topic of sanctions comes up a lot these days. Tax is a really big topic. There's just a lot. The accounting rules in this space are really interesting and sometimes challenging and evolving, and they're shifting, to your point. Not only are the rules shifting. Sometimes the rules don't exist yet, and so we're waiting for clarity. We're fortunate though, to now be in a place where most regulatory bodies are at least respectful of the impact of this innovation in this space. And so going proactively to have a conversation, "Hey, we're thinking about X, we want to be really proactive about this. Can you help us not have a footfall?" And I think increasingly, that's the case, as long as the tone is respectful going both directions.

Berlind: Yeah, you mentioned you're the tax guy, and so tax is a big, big, big issue here. Taxable, cryptocurrency, things like that. So when I first got started playing around just to get comfortable with crypto, I realized the record keeping here is actually impossible. Within the fee that I pay just to get some crypto to do something with it, there are 15 other fees, and I could imagine some of those fees being broken out as this goes here, regulation around this fee is this. The regulation here, and I realize the systems don't even exist to help make sense of this all. Is that a big barrier for enterprises, to integrate this into their Oracle Financials or one of these other, their financial systems?

Massey: It is a complexity for sure. There are software applications out there increasingly enabled to help enterprise and individuals deal with this dynamic. There is a little more guidance every day on this topic. The IRS, as an example, had put out FAQs three, almost four years ago now on this topic to help people answer their questions because they're inundated with questions. It requires a lot more thought.

Berlind: I'm just thinking at the enterprise level. Somebody's going to want to make sure this is, it's seamless, that they don't have to be a spreadsheet jockey to make it all work.

Massey: There's a lot of spreadsheet jockeying going on, and there's a lot of engagement with software tools to help that be known. But again, not every digital asset created equal. Not every protocol created equal. So it's not a graceful thing, but it's doable. This is absolutely one of those challenges that people face, like, wow, tax is hard, yeah, but it's okay. We can get through it. And there's enough of analogies that we can make, even though we don't have rules specifically on point, we make analogies. But you have to know what's a good analogy and what's a bad analogy. So when you get the phone call with a nice letter one day, you can justify your position. Not an easy place to play in, but if an enterprise decides, "Hey, this is worth it. Here's our list of considerations, let's start knocking them out. Help us survive this."

Berlind: Great. Rob Massey, leader of the Blockchain Practice, Blockchain and Digital Asset practice at Deloitte. Thank you very much for joining us here at World Economic Forum.

Massey: Thanks for having me, David.

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