Big banks are taking the ideas behind blockchain and adapting the technology to their business models. For instance, much of Italy’s banking sector uses Spunta, a blockchain network based on technology from New York-based firm R3 to reconcile balances between them, according to R3 founder CEO David Rutter.
“We’ve talked for some time now about the promise of enterprise blockchain and it’s great to finally see it in practice and working at scale,” he said earlier this week. “It’s a start. “We’d love to see it adopted in other European countries and then globally. The infrastructure that they have in place creates the foundation to roll out other technologies that can really have an impact on their bottom line.”
JPMorganChase has designed an in-house digital currency called JPM Coin, which it recently revealed has long lived with a large technology client. According to Lex Sokolin, co-head of fintech at blockchain firm ConsenSys, the coronavirus pandemic could lead to further adoption of blockchain technology by big banks.
“Being forced to adopt digital transformation as the primary mode of work definitely helps banks focus on digital payment rails,” he told CNBC by email.
Banks, he says, are more ripe to experiment with digital currencies due to a decline in cash usage. (According to Accenture, cash usage has declined by as much as 28% in the UK) Central banks are working on rolling out their own virtual money, and big brokerages like Fidelity now enable their clients to invest in crypto.
The People’s Bank of China, under the direction of the Communist Party, has tested a digital version of the yuan. Other central banks, too, are working on a framework on such so-called central bank digital currencies. Consensys, led by Ethereum co-founder Joseph Lubin, is working on central bank digital currency projects in Hong Kong, Australia, France, and Thailand.
“Our take is that this adoption and transformation will be incremental in most countries, but drastic in some individual geographies,” Sokolin said. “Payment systems don’t tend to replace each other entirely, but rather build on top of the rails incrementally.”
R3’s Rutter believes commercial banks use blockchain to improve their profitability. “It’s a difficult journey to adopt blockchain technologies because it’s computing at the industry level,” he said. “Once you get through that bit of pain you have a great foundation to roll out other applications much easier.”