Davos: Blockchain is here to stay

Bitcoin and blockchain has come under extreme scrutiny over the past few months and for good reason. It would be advisable to consider anything that increases in price parabolically as a very high risk. Banking bosses, politicians and TV pundits have had their say and it is usually negative but the bottom line is that the blockchain can no longer be ignored.

There is a battle going on inside the offices of the world’s financial institutions. Do they join the misinformed media and authoritarian governments and decry it or do they stand up and join those that are investing in the revolutionary technology.

Too high too fast

The problem is that financial institutions thrive on stability so they are instantly wary of anything that can shoot up by over 3000% in a year. This is exactly what the entire cryptocurrency market capacity has done, powered by its underlying blockchain technology.

In a report by the Financial Times head of emerging technology at Royal Bank of Scotland, Richard Crook, said;

“We are sitting down around this table trying to decide whose lunch we are going to eat. Because blockchain’s benefits come from decentralisation there is little point replacing one technology with another without changing the business model.” 

The looming threat to financial entities is that decentralization. It is effectively their job to centralize and control the flows of finances between countries and their citizens. Big players such as JP Morgan and Citibank are anxious because cryptocurrency goes against their business model which is making profit by controlling other people’s money. Banks also reject crypto because of its anonymity; they want to see who is sending what where, supposedly for money laundering reasons.

Davos sentiment

The World Economic Forum in Davos is holding its first session on ‘the crypto-asset bubble’ this week. Advocates of blockchain have cited their support for the technology claiming that it is resilient to censorship, fraud, and provides an immutable record of transactions. No centralized government, bank or corporation can offer the equivalent while they maintain a tight grip on finances and data.

Crypto has already entered Wall Street with a couple of major exchanges offering futures and even larger trading houses and banks offering to clear them. Energy giants are also looking towards blockchain solutions alongside medical research facilities, security companies, biotech and agricultural industries, social networks, and even some banks. Former Barclays boss, Antony Jenkins, labelled the blockchain effect as profound and went on to tell the FT;

“If you can imagine a world in which you did have one global digital currency, imagine what the benefit of that would be, imagine all the friction and the cost that would come out of the system. These things of course might be far in the future, but I don’t think they are very far in the future.”

Cryptocurrencies remain volatile by nature but it appears that the blockchain that powers them is here to stay.


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Bitcoin and the banking sector do not go well together – it is a known fact. But as the importance of bitcoin in the current global economy increases, it is becoming hard for the banks to ignore the digital currency completely.

Last week WB21, a digital bank announced that it will soon start accepting Bitcoin deposits. By doing so, WB21 became the first banking institution in the world to make such an announcement. This move by WB21 has not caught anyone by surprise for its own reasons. For starters, WB21 is the only ‘digital bank’ that allows anyone from a long list of nations to open an account online with them. The bank has been operational since last year and it handles almost all the leading fiat currencies in the world. Now for such an institution, it is impossible to ignore a universal currency like bitcoin.

Importance of Bitcoin in International Setting

Bitcoin, since its inception, has become the most favored currency for overseas fund transfer and remittances. This is mainly due to the negligible transmission fee associated with bitcoin transfers as against conventional fund transfer methods. Also, the bitcoin transfers are usually executed in less than an hour, no matter which part of the world it is sent to. But with fiat currency, a regular international fund transfer may take anywhere between a couple of days to a couple of weeks, depending upon its location.

Now especially with an increase in the value of Bitcoin and the people in countries like China looking at the digital currency as an alternative investment option has put bitcoin in the position of an important financial instrument. With the inclusion of bitcoin deposits, Digital Bank WB21 has now increased the reach of bitcoin to over 650,000 of its existing customers.

WB21 May Have Become More Attractive with the New Bitcoin Option

By including bitcoin as another payment option, WB21 may have just made itself even more attractive to its international clientele. Until now people were mostly able to deposit money into their accounts through wire transfer. This might have limited both the number of customers as well the number of deposits. However, with the introduction of bitcoin deposits, the whole process becomes much easier. It also significantly reduces the entry barrier for new customers.

The inclusion of bitcoin into its operations may prove to be a game-changer for the Digital Bank WB21. We can expect the bank to register a massive increase in the number of new customers in the coming days. Also, other banking institutions may follow the lead of WB21 and decide to include bitcoin payments in the near future.

Ref: NewsBTC | The Huffington Post | Image: Shutterstock

Disclaimer: The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of NewsBTC

The banks were never charmed about Bitcoin for multiple reasons. For starters, when the digital currency was first introduced following the collapse of the US banking system, it was hailed as the killer of the traditional banking sector. As time passed, the digital currency gained enough traction to actually threaten the traditional banking industry with its easy and fast transactions at literally no transaction costs.

The fierce competition offered by the bitcoin to conventional banking institutions did not help the cause either. As the rivalry between the digital currency and banking sector grew, the banking institutions have come to realize the importance of the technology behind digital currency. They are so convinced about the potential advantages of the digital ledger technology that many of them have already invested heavily into its research and development for banking applications,

Some of the leading banking institutions in the world to invest in the blockchain technology includes the likes of Goldman Sachs, BNY Mellon, Mitsubishi UFJ, Deutsche Bank and more. There is also a consortium of international banks created alongside a New York based blockchain solutions company for collective development and deployment of the blockchain solution for the banking sector. The consortium has already made some progress with a custom distributed financial blockchain called Corda for the purpose.

Regarding the banking sectors feelings about the implementation of blockchain technology into their operations, one of the tech publication quotes BNY Mellon’s Chief Information Officer, Suresh Kumar saying –

“This kind of feels like when the Internet started. There is an expectation that, okay, this is something new and different, so there is some value to leveraging it, and the question is: Okay, what are the implications of that for the traditional services, and what kind of services can be enabled that were not practical before?”

The banking sector doesn’t have one particular way of implementing the blockchain technology into its operations, rather different teams are looking into different applications of the technology. It can be for just maintaining AML and KYC requirements or to settle different types of trade, overseas transactions over the blockchain and more. Automation of the entire process is another main attraction for the banking sector. They want to use blockchain technology to switch as many transaction types to Straight Through Processing (STP), thereby completely eliminating human interference.

While the banking sector increasingly looks into the blockchain technology, it also means that those employed in the banking industry may have to start looking for new jobs in the coming years.

The applications of Bitcoin technology are already proven to be endless, it is up to the banks to decide how far they are willing to go with its implementation.

Ref: Fast Company | Image: NewsBTC

These days, there is a lot of debate on whether or not banks should collaborate with Fintech and Bitcoin players to bring more innovation to the financial sector. Resisting this seemingly inevitable shift will cost several billion AUD in revenues for Australian banks, according to a recent report.

Also read: Rusty Russell Proposes Generic Addresses for Bitcoin Wallets

Banks Need To Collaborate With Fintech and Bitcoin Companies

Very few people are aware of how the Australian Banking sector is subject to substantial regulation, which was drafted to prevent monopolies and collapses. Although there are four “major” banks in the country, the government keeps them separated as much as possible. Ever since the financial crisis hit in 2008, consumers started flocking to these four big banks, as they were the ones benefiting from market share recovery which was lost by smaller institutions.

While all of this is fine and dandy, a recent study by Frost & Sullivan shows that the Fintech market in Australia is a force to be reckoned with. Early projections estimate this market will reach the AUD4 billion mark by 2020, 25% of which will come from new added value to the country’s economy. But that is not what has caught the attention of financial experts, as the report also mentions banks stand to lose a lot from not collaborating with Fintech players.

To be more precise, Australian banks could lose as much as AUD13 billion in revenues by letting Fintech companies be their own industry. Keeping in mind how only AUD3 billion of this number would come from new revenue to the Australian Financial Services Sector between 2015 and 2020, the majority of this revenue would come directly out of the pockets of the four leading banks.

Frost & Sullivan Head of Research Audrey William explained:

“This disruption should be of serious concern to the Australian financial services sector. While Fintech will not end traditional financial services, Australian Fintech is in the development stage of the business cycle and already the Fintech startup space has grown rapidly in Australia.” Frost & Sullivan believes that the Big Four banks must react or face a large dent in future profit growth. The decline in return on equity will continue with the disruption from the Fintech sector.”

The decentralization of financial power is what makes Fintech – and Bitcoin – such attractive alternatives to traditional banking. Most of the problems plaguing the banking sector have been apparent for quite some time now, and the Fintech and Bitcoin enterprises come up with new solutions.

Moreover, these alternative financial platforms offer far cheaper rates than established banks.The big four banks in Australia have an allure of stagnation and stability, which consumers perceive as a weakness rather than a strength. Bitcoin and Fintech are providing new answers to riddles banks have failed to solve, such as decentralization.

Source: Australian Fintech

Header image courtesy of Shutterstock