One of the more surprising aspects about bitcoin is the interest it’s garnering from the financial services community. Banks and insurance companies around the world are beginning to pay attention to the digital currency, in some cases even starting experimental projects to leverage the key underlying technologies.
Banks Get Inventive With Bitcoin
Rather than just develop a new currency base, banks are learning how to create new ways for people to directly exchange money or other assets such as stocks and bonds, all without having to pay for a long series of financial middlemen or accumulating transaction fees. For example, one technique under investigation by Nasdaq is to allow stocks in private companies to be traded using a blockchain, which would allow a public accounting visible to everyone to be used before these stocks become public. This could replace the trading of paper certificates, which take weeks to move around.
Rather than simply buying and selling bitcoins, these new banking apps are more focused on how to move funds around the world quickly and with low to no fees — with the help of bitcoin-inspired technology, of course. It is an odd place for the banks to be, but a promising one.
Certainly, time has made a difference. A few years ago, bitcoin was more of a whipping boy and was widely slammed by banking executives. Now you don’t have to look too far to see new digital currency beachheads popping up.
Citibank Leads the Way
Citibank is perhaps the furthest along. It has an equivalent technology up and running that it calls Citicoin. While this is still under wraps and not for actual public use, the bank is seriously testing it across various labs around the world. While it can mine their Citicoins and see what happens, the goal is to “make sure we are at the leading edge of this technology and that we can exploit the opportunities within it,” Ken Moore, the head of Citi Innovation Labs, told IBTimes UK. So far, the bank developed three different blockchains as part of the experiments.
According to CoinDesk, other banks are already using bitcoin or experimenting with the technologies. Some of these include:
- French bank Société Générale, which posted a job listing in July for an “IT developer on bitcoin, blockchains and cryptocurrencies.”
- Swiss investment bank UBS, which announced it was opening a blockchain technology research lab in one of London’s major financial districts earlier this year.
- Barclays revealed plans to trial bitcoin technology. In March, the bank accepted three startups working on blockchain-related projects into its internal accelerator program. According to The New York Times, Barclays has 20 related internal experiments ongoing.
- Spanish bank BBVA has posted a number of relevant articles on its website, including a video tutorial on how to set up a bitcoin account. The bank has already invested in several bitcoin startups: It has Coinbase and purchased Simple.com, an online banking startup, last year.
- French financial services firm AXA is looking to use bitcoin to cut ongoing expenses from the remittance market. It even announced a 100 million euro tech incubator to explore this and other advanced technologies.
- IBM, too, has been developing its own version of blockchain technologies for use with so-called smart contracts.
Given all these projects, should IT managers be concerned about the security implications of digital currency and its related processes? Certainly — and for that reason, it is worth keeping an eye on these demonstration projects to see what happens.
If your company does a fair amount of foreign exchange, it might make sense to learn more from your business bank regarding how it plans to support virtual currencies and use blockchain technology.