Financial institutions (FSIs) have a hot topic to discuss these days: the blockchain. It seems that they can’t quite decide whether it is threat, or an opportunity. And where is the diving line between the two?
Of course, you may have noticed that there is little consensus of opinion in the cryptosphere; depending on whom you talk to, you will get a host of different viewpoints and arguments.
On the one hand, there are the blockchain supporters who advocate that the blockchain is the end of traditional banking, whilst others argue that both can coexist. As the CEO of an ICO portal said, “It’s a bit like Microsoft Windows and Linux.” And as we know, there are those who choose Windos and those who prefer Linux. But nether has wiped the other out.
Christina Comben, writing in The Merkle, quotes a former Bitcoin miner and believer in the crypto revolution who admitted that sometime, the ‘old’ world is necessary. “We tried to run things without a bank,” he admits, “but it’s not practical. Not everyone accepts cryptocurrency, there’s the price fluctuation. You can’t replace the banking system, in my view, at least not in the foreseeable future.”
Well, that is the situation now, but what about the future? Some, like Colin Luce of Uphold, believes, “Cryptocurrencies, for the very first time, pose a serious and significant threat to financial institutions because up until now, all of the innovation in Fintech has been at the application layer.” However, with more blockchain apps now operating in ‘real life’, the FSIs are wondering what that means for them, especially with increased cross-border opportunities available via the blockchain.
One main issue is that blockchain-based platforms could undercut the banks and other FSIs. To survive in a convincing manner they need to seize the opportunity the blockchain offers rather than fight against it. Sarah Bergstran, COO of Bitbull Capital says: “It will undoubtedly reshape the financial universe as we know it. However, savvy institutions are adopting the technology and using it to reduce their costs, rather than trying to extinguish it.”
Goldman Sachs purchase of the Poloniex exchange signalled its willingness to get involved. But, we are not yet at a stage where we can predict the future of FSIs with any clarity; some will be winners and there will be some losers. Adapt, or not quite die but limp along for a while until extinction faces you, is the scenario facing FSIs now.