The financial industry has been interested in blockchain technology for years, but only recently has such interest materialized into actual solutions and investments. At the “Real World Blockchain Solutions session of ILTACON 2018,” financial and legal professionals discussed just the novel technology is finally taking shape.

American Express's Strategic Investment

While American Express hasn't launched any blockchain applications of its own, with a recent investment, the financial company is positioning itself to leverage the technology in the near future. In 2015, the company invested an undisclosed amount in Abra, a peer-to-peer digital currency investment app that allows individuals to transfer Bitcoin funds to one another.

Andrew Brereton, vice president of operations in the general counsel office at American Express, said that purchasing equity in Abra “was very much a strategic investment” for American Express.

“We wanted to get close to a company that has successfully started to use blockchain so we could learn from the technology and see how it is applied in the payment space,” he said.

Brereton added that the investment will help American Express potentially stay ahead of future disruption blockchain can bring to the financial transactions space. “If we don't make the payment space better and more efficient for our merchants, there will be challenges from other competitors.”

To be sure, American Express has been testing out blockchain technology in-house through building a few pilot payment blockchain platforms. Through this nascent development, Brereton said the company has come to realize the numerous benefits of the technology. “We believe very strongly that the shared digital ledger is tamper-proof and immutable.”

Equally as important, blockchain is also “very fast” to launch as a platform, Brereton added. He explained that in the pilot blockchain programs the company has run so far, “we have boarded them on the system in a matter of weeks.”

OpenLaw's Bid to Help the IRS

Like other smart contract startups, OpenLaw is looking to change the way attorneys and their clients use legal agreements. And with a proof of concept around an employment agreement smart contract, how such change can occur is coming into focus.

Kirsten Albers-Fiedler, law associate and legal engineer at OpenLaw, explained that the proof of concept is essentially a smart contract which allows an employer to automatically pay an employee in the cryptocurrency Ethereum at predetermined intervals. Each payment will also automatically transfer a certain amount federal tax withholdings directly to the IRS.

Albers-Fiedler noted that the smart contract has the “potential to decrease the time and cost” it takes to manage employment contracts and payments and ensure all tax laws are complied with.

To create the smart contracts, OpenLaw would offer employers templated employee agreements that would they need to fill out with information like the effective date of the employment offer and the amount of compensation. From there, “the parties can send out the agreement for signatures, and it also allows them to decide who the signatories will be and who has the right to edit the document,” Albers-Fiedler said. OpenLaw will then code all that information into an executable smart contract.

Albers-Fiedler noted that main benefit of such contracts would be to help better automate the paying of taxes for employees, which has been a significant pain point for the IRS. She noted that currently, “the IRS spends $4 billion on enforcement activities” with regards to unpaid taxes. The hope, then, is that this type of blockchain solution may be readily welcomed by the government agency.