The banking sector is identified as the one that can benefit most from the implementation of blockchain technology. What does the process of this integration look like at present?
The issue of the connection between banks and blockchain frequently appears in our articles. It is a topic that ignites the imagination of the crypto world because this technology seems to be very well suited to this sector. Banks struggle with some problems stemming from their centralized character. Many transactions (both internal and external) might be much faster with the aid of the blockchain.
For the most die-hard crypto supporters and maximalists, such relation may seem strange, since Bitcoin was developed to fight with the banking system. But we shouldn’t forget that blockchain isn’t only the domain for cryptocurrencies. The benefits of this technology could be useful in many other industries. And many banks have already begun the process of integrating blockchain into their systems. How successful are these attempts?
Probably the most known example comes from JPMorgan Chase, the largest bank in the USA, and the sixth-largest bank in the world by total assets. At the end of 2018, the bank has issued its own stablecoin pegged to the American dollar. JPM Coin is designed to be in use for inter-institutional transactions, to shorten their time, and uses Ethereum blockchain as a distributed ledger.
The announcement of JPM Coin was quite a news in the time of cryptocurrency crisis. The largest American banks using the blockchain technology were for some crypto folks a sign of upcoming changes for the stagnant, bear market. And even if it didn’t change the situation at the release day, it still was a significant breakthrough for blockchain banking.
JPM Coin is part of a more comprehensive initiative called the Interbank Information Network (IIN), which is aimed at facilitating cross-border transactions with the aid of the blockchain technology. As you may see on the JPMorgan website, the number of participants is impressive. And according to the latest news, more than 80 Japanese banks are on their way to join the initiative.
Another giant multinational bank that is apparently not afraid of blockchain technology is the Spanish Banco Santander. Back in September, the institution launched the first end-to-end blockchain bond on Ethereum, valued at $20 million. According to the bank, the move was an attempt to make issuing bonds faster and easier.
The bond was recently redeemed by the bank, also with the use of the Ethereum blockchain. By this action, Santander managed to complete a full life cycle of the blockchain-based bond, provided that this technology could be successfully implemented to securities issuance.
But that’s only a recent example of the Spanish bank’s involvement in the cryptocurrency industry. Banco Santander is also a partner of Ripple. The result of this cooperation is Santander One Pay FX – an international, blockchain-based transfer service. It is currently online in four countries (Spain, the United Kingdom, Brazil, and Poland), but according to the last announcement, it soon might be expanded to six more markets. By using blockchain technology, Santander managed to shorten transaction time significantly.
Both Santander and JPMorgan are examples from the highest level of international banking. However, the usage of blockchain in that sector of the economy is not limited only to the top players. A few months ago, we mentioned in one of our Weekly Updates about the initiative aimed to connect banks in Latin America.
The initiative is a result of the cooperation between cryptocurrency exchange Bitex and banking technology provider Bantotal. The main goal is facilitating cross-border transactions between 60 banks in the region. Before the launch of the program, all transactions usually took many days to be finalized. They had to be transferred through many bureaucratic levels, including exchanging fiat currencies.
Thanks to the cooperation with a crypto exchange, payments can be processed smoothly with the help of its infrastructure. Perhaps the solution isn’t as elegant as the previous ones, as it still depends on the help of intermediary in the form of the cryptocurrency exchange. But still, it is a far more reliable and functional solution than the previous system. And an example that shows that blockchain banking isn’t restricted to big, multinational banks.
Of course, these are only particular examples of how the banking sector interacts with the blockchain. This solution seems to fit in naturally with this sector of the economy , and more and more institutions are aware of the potential benefits of its usage. The only thing that may be worrying is the eventual standpoint of the national government on the growing banks’ interest in this technology. Recent events clearly show that the legislation aspects of both blockchain and cryptocurrencies are being called into question. Nevertheless, we still are far from making the most of this technology. But we are on a good way to do this.
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