The Future of Corporate Blockchain Adoption: A Shift Towards Public Chains

Over the past decade, financial institutions have predominantly opted for closed, private blockchains for digital assets, rather than open, permissionless systems. However, despite significant investments and testing, none of these private blockchain networks have achieved substantial traction with customers, businesses, or institutional investors. A primary argument in favor of private blockchains has been that regulators prefer, and sometimes require, permissioned blockchains. Nevertheless, this perspective is likely to evolve in the coming years. As regulators' views change, three key factors will drive this shift: liquidity, technological maturity, and regulatory acceptance of public blockchain ecosystems. Public networks like Ethereum boast millions of users and substantial capital, providing digital assets with better pricing opportunities. In contrast, private networks may struggle to offer fair pricing due to limited buyers and sellers. Furthermore, public blockchains have demonstrated remarkable technological maturity and resilience, with Ethereum alone supporting hundreds of thousands of smart contracts and processing trillions of dollars in transactions annually. As regulators become more accepting of public blockchain ecosystems, they will likely acknowledge that existing Know-Your-Customer (KYC) and Anti-Money-Laundering (AML) rules can be effectively applied to digital assets on public networks. The EU's Markets in Crypto Assets (MiCA) regulation is a prime example of this shift, having unlocked investment and innovation in public blockchain systems among European banks. Ultimately, the advantages of private networks are eroding, and regulators will soon start questioning the use of private networks for digital assets.