Meet the German Baron Who Thinks Blockchain Will Beat the Middlemen
The former head of Germany's armed forces
is now helping to bring blockchain tech to some of the world's largest financial institutions. An early advisor to distributed financial technology firm Ripple, not to mention a bonafide German baron, Karl-Theodor zu Guttenberg today plays a key role in enabling the heavily funded startup to make inroads in the banking sector. But as co-founder of consultancy Spitzberg Partners, he is setting his sights beyond finance. Over the course of his time at both the Ministry of Defense and Minister of Economics & Technology, zu Guttenberg built up an extensive network of global politicians, technologists, and bankers.
Long rumored to be a potential candidate to replace his former boss, German Chancellor Angela Merkel, zu Guttenberg last month revealed exclusively to CoinDesk that his firm had partnered with the State of Delaware's blockchain initiative to help bring a global tech cohort to the tiny US state. Now, he says his firm has taken on a "significant portion" of blockchain companies as clients and is consolidating those resources to focus on a concerted push to bring the technology to the world. At Spitzberg’s New York City headquarters, zu Guttenberg explained how the work he's conducting in Delaware, with Ripple, and with other blockchain firms, is part of a larger plan.
Zu Guttenberg told CoinDesk:
"I always tell the dreamers in the bitcoin community and the blockchain community, don't expect that this will happen at one point and everyone is enlightened. It will be a bumpy process."
Zu Guttenberg founded New York City-based Spitzerg Partners in August 2013 in reaction to requests he said he received from leaders in the US tech sector for advice on navigating complicated geopolitical issues. After commissioning a study on the leading causes of failed companies, he narrowed the reasons to inadequate geopolitical and cross-cultural knowledge, as well as an inability to properly understand the regulatory implications of both. "I was interested in the fact that they were burning billions [of dollars] in their attempt to roll out by entirely misunderstanding a few core elements," he said.
Currently, Spitzerg focuses on revenue generating firms in four main industries – Internet of Things, artificial intelligence, big data analytics and blockchain – with a rapidly growing cohort of blockchain startups, though the co-founder didn't share the exact number. Zu Guttenberg defines his typical client as a company that could become the subject of either a "fiercely led political debate, a harsh counter-reaction by old industry or a combination of both."
"And there are many."
The first pebble
Zu Guttenberg first caught the blockchain bug in 2012 at a conference where he met the co-founder of San Francisco-based Ripple, Chris Larsen, and New York-based Digital Currency Group founder and CEO, Barry Silbert. Following a conversation with the two, zu Guttenberg said his interest was piqued, mostly about the idea of a shared ledger with the power to let counterparties do business without a middleman. He bought about $30 worth of bitcoin and began a dialogue with Larsen that culminated in July 2014 when he formally joined Ripple's advisory board.
At the time, he had been working on a series of unpublished articles about international capital flows and the history of correspondent banking and discussed the role that Ripple's cryptocurrency, XRP, could potentially play in freeing up dormant money in banks around the world. With XRP in the midst of an explosive growth cycle that has seen it become the second-largest cryptocurrency by market cap, zu Guttenberg, and his team have continued to work behind the scenes to help build out Ripple’s network.
Most recently, Ripple has added 10 new financial firms to its network, including MUFG in Japan, BBVA in Spain and SEB in Sweden, and has completed a pilot with 47 global banks. Though Ripple has set legacy financial technology firm Swift square in its sights, zu Guttenberg said that Ripple’s secret to widespread adoption has been recognizing when to play nice with other legacy platforms. "Many of these players, although they are sitting on already rotten instruments or structures, will be in place, and in power," he said. "[They will be] dramatically empowered by political circles for quite a while and they're still extremely influential."
To help modernize those legacy systems, though, Ripple will require more than just a willingness to play nice with banks. Government support is crucial. Zu Guttenberg cited smaller nations such as Estonia and Singapore, and jurisdictions including the Zug region of Switzerland and Delaware, as fundamental testing grounds for the types of legislation that might one day underpin a new financial infrastructure. Specifically, he said the "charm" of Delaware's increasing openness to blockchain should serve as a template for jurisdictions around the world.
Most recently, Delaware state senators introduced a bill that would explicitly name blockchain as a recognized technology to support the owning and trading of corporate stocks. "Why don't we translate the Delaware experience to another state or city in Germany?" zu Guttenberg asked. "Why don’t we try to do the same in the Middle East? Why don't we try to do the same in Latin America somewhere?" The ex-minister added that he's already had conversations with his former boss, German Chancellor Angela Merkel, in which she expressed a "general" interest in the technology.
"The question is, will every department be adopted, or will it just be two or three departments doing it?" he said. While he said the topic of how blockchain is being adopted by governments comes up organically in his meetings with leaders around the world, zu Guttenberg argued that the push to bring blockchain into widespread adoption will require a more concerted effort. "People [need to] deliver the experiences from these test runs to other governments, to old industry and back to the blockchain industry."
"That doesn't happen by itself and we're delighted to be at that intersection."
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Alan Zibluk Market Hive Founding Member