Banks Starting To Use Public Blockchain
Things are getting very interesting within the world of blockchain. We are watching a lot of pieces moving around. It is getting difficult to predict where things are going.
We all know the banks are threatened by cryptocurrency and blockchain. Or are they? This could be a major boom to them and it is likely they see the potential.
To start, we can presume most of the major banking players are looking to provide custodial services to their clients. Digital assets will end up being a lot more than just cryptocurrency as we know it. This is not something that multi-million dollar investors are going to want to deal with. They are not going to secure their own keys and write down information to ensure they can access their wallets.
This is one area where the banks will step is.
Another is in the transformation of traditional assets. We often discuss how everything will be tokenized. This includes most of what Wall Street deals with.
Now we are seeing the evolution of that taking place.
Banking Transaction On A Public Blockchain
JP Morgan is at the forefront of the banking interest in blockchain. For all the bashing that Jamie Dimon did with Bitcoin, he is smart enough to realize an opportunity. He also see how things will be changing within the financial arena in the future. It is likely to occur since his bank is helping to push the change.
A number of banks are taking part in a pilot project that could well become the norm in the future.
Here is the result:
“It was the first time we had tokenized deposits. I actually think it’s the first time any bank in the world has tokenized wallets on a public blockchain.
This is a rather interesting twist. We are accustomed to banks operating within their own isolated ecosystem. Yet, we are now watching them mess with public blockchains for transactions. This means incorporating public wallets as part of the transaction. This radically changes the nature (transparency) of settlements.
JPMorgan, DBS Bank and SBI Digital Asset Holdings just completed the first live trades for the program’s first industry pilot, where they traded tokenized government bonds and executed foreign exchange transactions using tokenized Japanese yen (JPY) and Singapore dollars (SGD).
According to the MAS, the pilot shows that tokenized assets can be traded, cleared and settled instantaneously, which can bring down the costs of cross currency transactions.
Here is a conclusion that is no surprise to anyone who is involved with cryptocurrency. We also know that banks care little about decentralization. The blockchain is not really of great concern to them as long as they can provide the viability of the technology.
It is also a situation that makes Ethereum even more interesting. While the last few weeks showed how that blockchain is moving towards centralized control (with the likelihood of KYC tied to it), we can see how that will hold appeal to the banks. It is something that, with upgrades and scaling, could hold great interest to these financial institutions.
“The live pilots led by industry participants demonstrate that with the appropriate guardrails in place, digital assets and decentralized finance have the potential to transform capital markets. This is a big step towards enabling more efficient and integrated global financial networks.”
Make no mistake, Wall Street is coming to this industry and they are not going to be turned away. Once we opened the door for entry, they bulldozed their way in. This is going to radically shape the industry going forward.
Forcing Changes
The banks are well aware of the threat posed to them. For this reason, they are looking to force changes in the system. Anything they can do to enhance efficiency while maintaining a piece of the pie is what they will do. At this point in time, Wall Street can actually lead the charge.
Cryptocurrency was started by the innovators but it is quickly being taken over by the major players. We see this across the board. The fact there are only a few truly decentralized blockchains shows how the early developers botched things up. We now are apt to deal with the fallout.
That doesn't mean all is lost. It simply is creating odds allies. Governments are seeking control as are the bankers. True crypto advocates are seeking freedom. There are many positions being pushed. The challenge for the cryptocurrency industry is that most people are still only concerned about price. This will end up being the downfall for most projects.
In the end this is a game of development. Can the industry out-code these major institutions? We are going to see second layers become even more important. The base layer are open to all. The difference maker will be what is built at the application level which is going to reside on layer 2.
We are dealing with hundreds of trillions of dollars here. We need to be mindful of the attraction that holds. The established system will not sit back and allow their gravy train to be taken from them.
At the same time, mindfulness to the threat is paramount. This is why we discuss resiliency so often. Hive, Ethereum, Hoskinson, or Larimer is not taking on Wall Street entities like JP Morgan without ensuring all proper forms of defense are in place. The question is how many blockchain projects are actually thinking like this?
It might seem like we are being repetitive without discussion of the same topics. However, as evidence by this pilot project, there are some powerful companies already forged their path in this. If we are going to take on the major investment houses, we best understand the challenge before us.
And that means clearly establishing those areas of defense which will be required to take them head on.
Without that, all of this will get swallowed up by the major money Wall Street brings.
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