Bitcoin price has taken a major hit since Mt. Gox, but that has not stopped Bitcoin from building a worldwide infrastructure that has led to massive expansion opportunities. It seems to have traded price for a deeper market penetration, in every sector of modern society. Bitcoin has already made a connection with online consumer payment giant PayPal, and now commercial banking may be its next conquest.
At a panel meeting sponsored by Society for Worldwide Interbank Financial Telecommunication (SWIFT) this week, correspondent banking leaders were all abuzz about Bitcoin and cryptocurrency technology influencing the future of banking, both now, and in the future. Correspondent banking is banking done by one bank for another bank, for instance, performing certain transactions through another bank in another country, rather than create a branch just to do those transactions. These behind the scenes banking affairs are seeing this technology as a wave of innovation that is just about ready for prime time.
“We really can’t close our eyes,” said Cheryl Gurz, managing director of the emerging technology segment at Bank of New York Mellon Treasury Services. “If we as traditional correspondent bankers don’t keep looking and determining where [cryptocurrency technology] will take us, new entrants will completely take our space. What is the technology that is enabling Bitcoin currency to move effectively with more visibility and at lower costs. How can we take that into our current systems and make them more efficient, faster, cheaper and more transparent?”
That this panel event was sponsored by SWIFT is significant. Think of SWIFT as a PayPal for international commercial/central banking interests. Bankers of scale want faster, more convenient transactions, too. And Bitcoin’s advanced technology can take their monetary systems to the next level just as easily as it can for consumers.
“From a compliance perspective, these distributed ledgers provide a database of transactions, and that’s a good thing,” says Houman Shadab, a law professor at New York Law School. “It was evidence based on the electronic paper trail from Bitcoin that was used to find the defendants in that case guilty. Once you look past the headlines, it’s a great investment from a bank’s perspective to go with these technologies.”
With Russia looking to develop a SWIFT competitor with their “Double Eagle” international banking system to reach the global markets later this year, that could very well be the “new entrants” Gurz was speaking of. Far be it for a nation, like Russia, to use a spectacular new technology for themselves, but deny it’s use by their citizens. Stranger things have happened in the world of global economics. SWIFT is a tough nut to crack, and Russia has big plans for getting off the U.S.-managed banking system. Something to keep an eye out for later this year.
Using Ripple Labs’ distributed ledger system is also an attractive option that can reduce many costs of doing business. These savings can be put into anything from lines of complementary business to correspondent banking like supply-chain finance and trade finance.
Bitcoin and digital currency technology, in general, may make it into the banking sector through the back door. Banking may be forced in the coming years by the speed and ability of digital currency to either adapt to it, or get passed by as people do their banking on their smartphones, without need for a centralized middleman, taking a cut of the action.
American Banker contributed to this story.
Would you want you bank to integrate Bitcoin into its services, thereby tracking your bitcoin usage? Or can you see a day when you won’t need a bank at all, and everything will be done by you on your phone, digitally? Share above and comment below.