BNP Paribas: Bitcoin Will Fail Because it Lacks Characteristics of Traditional Banking

According to the UK’s Telegraph, international banking giant BNP Paribas have issued a report on the future of Bitcoin. For them, widespread adoption will be limited by cryptocurrencies’ deflationary nature, and the fact that they lack a “lender of last resort.” The bank claimed that cryptocurrency could pose risks to individual nation’s monetary policies too.

Interestingly however, the report focused on the hypothetical issues that could emerge if Bitcoin was to be adopted by a nation as their sole currency. This marks a change from the standard “it’s a bubble” comments usually hailing from the world of institutional banking. However, their assessment of the implications of Bitcoin achieving what would be the holy grail for a currency is far from a glowing one.

The report highlights the issues that could arise if consumers used cryptos for mortgages and other such financial products. It argues that there would be no security in the event of a financial crisis. For them, a central institution capable of overseeing such services and products, and bailing consumers out if necessary, is vital.

For cryptocurrency advocates, the lack of centralised authority is Bitcoin’s biggest selling point. However, BNP Paribas claimed that without an institution such as the UK central bank, there would be no one to protect consumers’ savings and mortgages in the event of a similar financial crisis as 2008.

The report also argues that the general uptrend in its price over the lifetime of Bitcoin does not make it a reliable store of value. For the banking behemoth, the lack of regularity in the exchange of goods and services for Bitcoin means it also lacks “symbolic value in real terms”.

They also raised their concerns about the deflationary nature of Bitcoin. This can have all kinds of negative effects on an economy, potentially leading to complete financial stagnation. What was worth 7BTC in January, is now worth 1BTC. This leads to a situation where it makes sense to save rather than spend. Magnify this across the entire economy and businesses generate less revenue. It can also lead to lay offs if wages don’t fall in sync with deflationary pressure. Bosses simply can’t afford to continue paying their staff and are forced to let them go.

The beginning of the following quotation from the bank’s report is rather telling:

The potential threat to central bank seigniorage, worries about money laundering, financial stability, tax avoidance and crime, all make regulatory moves elsewhere possible.

Along with the other factors mentioned, for BNP Paribas, there’s too much profit and control possible with the system we currently have. Bitcoin represents sound money that rewards people for being frugal and can’t be manipulated into paying large dividends for those at the top. You can understand why the bankers of the world want to put people off this cryptocurrency thing.

 

Image: PixaBay


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Everyone in the cryptocurrency world is well aware of how BNP Paribas is actively working on blockchain technology. Things have taken an interesting turn, as the financial institution is going into co-development mode. Various clients will be invited to pilot blockchain applications with a focus on transaction banking. An exciting development for distributed ledgers, that much is certain.

The year 2016 has been all about for collaboration for BNP Paribas when it comes to blockchain technology. Earlier this year, the group conducted a Blockchain Bizhackathon, which saw considerable interest from developers all over the world.The bank is now taking things one step further, as they are eyeing several blockchain pilot programs for transaction banking.

Plenty of Blockchain Projects For BNP Paribas

To put this into perspective, BNP Paribas will be working with some prominent partners. This includes Sucafina, Solvay, and the DFDS Group, among others. Corporate transactions need a dire revamp, and distributed ledgers seem to be the right way to go. However, there is still a lot of work to be done regarding traceability and security.

BNP Paribas Head of Transaction Banking Jacques Levet told the media:

“We’re delighted with the success of this first-ever Bizhackathon, which resulted in these innovative projects, all sharing one basic feature – that they are being co-developed hand-in-hand with our clients. Based on the highly-promising blockchain technology, these projects stem from close collaboration between BNP Paribas transversal teams, our clients and Blockchain experts.”

A few details were revealed as to which types of blockchain pilots the world can expect. There is a strong focus on letters of credit, international payments, and collateral management. All of these areas have – or are close to finishing – blockchain pilot programs ready to be deployed.

In fact, the collateral management blockchain project has an internal name and is called Collat’Shaker. This project will improve efficiency in international trade transactions involving commodities. Its key selling point is providing a common status on an individual transaction to all blockchain members.

More importantly, Collat’Shaker will share and manage positions with partner sin real-time. This should help in bringing the involved parties closer together. Moreover, the platform is allegedly easy to use and provides an “efficient response” to issues the financial industry had to cope with for several years now.

Source: Finextra

Header image courtesy of Shutterstock

The banking sector is finally making some headway with their exploration of blockchain technology. Soon after UBS and Deutsche Bank made an announcement about the success of their blockchain technology experiment, two more international banks have now come up with their own solutions and testing them out. The French banking firm, BNP Paribas and the Bank of Ireland are the duo who have brought their blockchain-based toys out in the open.

The Bank of Ireland recently conducted a trial run of its proof of concept application developed jointly with Deloitte. The blockchain application developed by the Bank of Ireland supplements the existing infrastructure by adding extra features to increase the efficiency. In the trial, the proof of concept application was used to unify data sourced from multiple systems under the Global Market division. The unified data is then migrated onto a blockchain, creating a distributed, immutable copy of searchable data.

The data stored on the blockchain could be readily queried by clients, relationship manager and other officials with the right clearance to visualize, verify and audit in real time. The proof of concept developed by Deloitte and Bank of Ireland, if deployed across the bank can greatly improve the efficiency, considerably reducing the turnaround time.

While the Bank of Ireland went for their own internal system to try the blockchain application, BNP Paribas has gone for a different approach. It has announced that it will soon be piloting its new blockchain application with a crowdfunding platform. BNP Paribas has thereby partnered with Smart Angels, a crowd-investing platform that enables companies to crowdfund the required investment against equity. As per the partnership, the blockchain application developed by BNP Paribas Securities Services will be used to register the financial securities issued by the companies that are raising funds on Smart Angels.

The whole process of filing and issuing shares usually takes a long time, anywhere between a couple of days to a week. By incorporating blockchain technology, the issued financial securities can be recorded on the blockchain in real time. Once an entry is registered, a digital ownership certificate can be issued immediately. The whole process of issuance of shares and receiving the proof of ownership will take no more than an hour.

Once BNP Paribas Securities Services incorporates the blockchain technology based application for issuing certificates, the whole process will become a lot easier for both small and large investors. The increased rate of clearance will also help the financial institution greatly reduce costs and prevent backlogs.

The advent of smart contracts is soon going to trigger a massive, large-scale migration of systems from traditional databases and filing cabinets to blockchain based databases which are more secure, easily retrievable and irrefutable. In no time, we may as well find almost all the systems around us powered by the blockchain, communicating with each other.

Ref: Financial News | Img: Gfmag

Various Bitcoin companies around the world are looking for investors to get their project moving along and deliver services to a broader audience. Digital Asset Holdings, a blockchain startup run by Blythe Masters, recently closed a new funding round, raising over US$50m from various global financial leaders. With this money, the company will eventually be able to bring blockchain technology use cases to people all over the world.

Also read: BTL Announces Launch of Its Blockchain Remittance Platform (Interbit) at BC Tech Summit

Digital Asset Holdings Secures Funding

Based on various mainstream media headlines over the past few weeks, the future of Digital Asset holdings was in peril. The blockchain startup was struggling to raise additional funding, as potential investors were not entirely convinced of the service offered. But it looks like those reports were premature, as over US$50m has been secured by the company, and the future’s looking bright.

Developing Distributed Ledger Technology for the financial services industry is a challenging task. It goes without saying that any company active in this industry will need a lot of time, manpower, and financial aid to bring this technology to the traditional financial world. But Blythe Masters and Digital Asset Holdings can count on a select group of investors who want to see this project succeed.

Among the recent investors are firms such as ABN Amro, BNP Paribas, Citi, J.P. Morgan and Santander InnoVentures. So many established financial players who are looking for alternative infrastructure solutions are of great value to Digital Asset holdings and the general blockchain community.  In the end, all parties want to achieve the same goal: reducing costs and making the financial system more efficient and secure.

Digital Asset Holdings CEO Blythe Masters stated:

“These investments represent a tremendous endorsement of Digital Asset from banks, exchanges, settlement and clearing firms, central securities depositories, and market infrastructure and professional services providers. Our strategic investors have come together from across the financial services industry to help drive global adoption of transformative solutions which enhance the vital services that they provide.”

By securing over US$50m in additional funding, Digital Asset Holdings can continue the road to bringing Distributed Ledger Technology to various partners all over the world. By creating tailored business logic applications on top of privately permissioned blockchain, financial players will be able to communicate with one another by using a cryptographically secured infrastructure.

Expanding The Board of Directors

As a result of this successful round of funding, Digital Asset Holdings also announced how they will be expanding their Board of Directors.  Several of the investors will see one of their staff join the Digital Asset Holdings Board, although not all of the names had been confirmed at the time of publication.

DTCC Ceo and President Mike Bodson said the following:

“Distributed Ledger Technology offers a once-in-a-generation opportunity to re-imagine and modernize the industry’s infrastructure to address long-standing operational challenges. This investment positions DTCC to play a leading role in fostering industry-wide adoption and helping to introduce the standards, governance and technology to support distributed ledger implementations. We look forward to working with our partners at Digital Asset to explore opportunities to improve upon the existing infrastructure in certain defined areas where automation is limited or non-existent and where the technology provides a clear benefit over existing processes.”

Mike Bodson is one of the four new Board of Directors members for Digital Asset Holdings, along with BNP’s Catherine Flax,  Deutsche Börse Group’s Ashwin Kumar, and J.P. Morgan’s Sanoke Viswanathan. Together with the existing board members, Digital Asset Holdings can continue its mission to build distributed and encrypted processing tools.

Source: Digital Asset Holdings

Deutsche Bank is one of the latest banks to back blockchain technology. The Frankfurt, Germany based bank has responded positively to the European Securities and Market Authority’s (ESMA) call for evidence on investments using virtual currency and blockchain technology. ESMA had called upon all the stakeholders to express their views, experiences and any information on utilization of digital currency and the technology behind it for trading and recording ownership of securities.

Deutsche Bank’s response to the Call for Evidence issued by ESMA was published with other responses on 30th of last month. Deutsche Bank’s response, signed by the global head of regulatory policy — Daniel Trinder states the important benefits of using bitcoin or related systems in today’ banking environment. Some of the benefits mentioned in the report includes stability and reliability of the system, faster transaction processing and low customer costs. Apart from that, by using blockchain technology in their regular operations banks can have a more efficient, inexpensive and secure platform for meeting regulatory and maintenance requirement.

Further down the report, Deutsche Bank plays the devil’s advocate by mentioning the potential risks involved. Daniel mentions that blockchain technology may come with few potential risks and it is better to understand those risks and fix them well in advance.

The German bank’s response to ESMA also contains information about its new innovation labs which was launched recently as part of Deutsche Bank’s Strategy 2020 initiative. The innovation lab will be used to developing and testing various blockchain based applications targeted towards improving the bank’s products, processes and services.

According to Deutsche Bank ‘s analysis, the blockchain technology applications will be ideal for fiat currency payment and settlement, securities management, smart contracts, asset registries, know your customer, anti-money laundering registries etc.

With Deutsche Bank announcing the launch of its new innovation lab which is focused on blockchain technology, it has now become one among several other banks like RBS, BNP Paribas, Societe Generale etc. who are involved in research and development of blockchain applications suitable for their operating needs.

Close to the heels of Societe Generale’s job listing for a blockchain and bitcoin developer, another major French bank BNP Paribas has announced its involvement in bitcoin and blockchain technology research. According to a few news sources, the banking giant is looking to add bitcoin to one of its currency funds.

In these times, where the banks are forced to innovate and embrace the technology behind bitcoin and digital currencies, this piece of information does not come as a surprise. The bitcoin technology has emerged as a threat to the traditional banking and financial sector mainly due to its capability of offering easy, fast, cheaper and more secure fund transfers. Banks are now trying to keep up with the bitcoin industry by exploring possible ways of adopting the same technology for moving fiat currency across borders and between branches.

The spokesperson for BNP Paribas has recently confirmed that the financial institution is currently involved in beta testing cryptocurrency based applications. The bank will soon be making an announcement about its progress.

In the spokesperson’s words – “ We are looking at blockchain technology and how it can be applied to post trade processes to make things faster and potentially cheaper, but it’s all very much a project and it’s all in testing, It’s nothing live.”

One of BNP Paribas’ analysts, Johann Palychata had recently written an article about the progress of bitcoin technology and how it can leave current businesses redundant in fintech industry. The article featured in the company’s magazine was deemed a bit controversial by some people in financial technology industry.

Earlier this week Societe Generale’s requirement for an IT developer with expertise in bitcoin, altcoins and blockchain technologies offered a hint about the bank’s involvement in research and development of bitcoin technology to meet its operational needs.

READ MORE: French Bank Hints Interest in Bitcoin through Job Ad