By David Drake
Utilization of cryptocurrencies and blockchain in the banking sector is not an entirely new concept. Banks around the globe have either reacted positively or negatively to crypto implementation.
Blockchain technology has, however, evolved from being ignored and seen in a bad light, to providing innovative solutions in the banking industry. On realizing its potential, banks are finding ways to create applications that make transactions cheaper, faster and less complicated.
Just recently, Falcon, a Swiss private bank, has initiated direct transfers of and conversion of select cryptocurrencies into fiat money. At the moment, the bank is working with Bitcoin, Bitcoin Cash, Ether and Litecoin. This move by the bank makes crypto assets fully bankable, which means crypto investors can easily place an order to trade either through the bank or e-banking.
In addition, the bank will incorporate crypto assets in portfolio statements and tax documents. To facilitate this, the Falcon has ensured security for crypto assets by integrating safe storage and complying with both anti-money laundering and know your customer regulations. For players in the cryptocurrency space, this is a step in the right direction.
Massimiliano Rijllo, CEO of Coinnect SA says, “This is an interesting move from a traditional Private Bank to expand into the crypto sector. Until now, we have seen mainly new start-ups promoting the idea to create ‘Crypto Banks’, traditional banks remained sceptic or postponed any action waiting more clear regulations.”
He further adds that more bank entries and mergers are likely to happen in 2009 as banks seek to provide innovative solutions.
“In my view, we will see traditional banks entering the crypto market and new start-ups launching crypto financial services. Moreover, and I think this a very important game changer, crypto start-ups will start to cooperate with existing banks to launch new projects, leveraging and merging the experiences of both worlds. An example of this cooperation is what has been announced by Avaloq – an established Swiss bank outsourcer, and Metaco – a blockchain company, to cooperate with Gazprombank to launch crypto asset management services. In my opinion, successful projects will be driven from this kind of cooperation,” he adds.
The Turning Point
Even so, there are different views on whether the move by Falcon bank will promote growth in the banking industry. From one perspective, this move is a definite turning point for the banking industry. Its promising ability to offer transparency and identify inconsistencies coupled with the short time it takes to transfer funds, crypto banking will contribute extensively to more banks adopting cryptocurrencies and ultimately, wide acceptance by the masses.
On the other hand, some people hold that the volatility of cryptocurrencies, coupled with fraud and security challenges are major concerns. The fact that most banks view cryptocurrencies as risky is a major hindrance to their adoption.
Nonetheless, they all agree that once proper regulations and security measures are in place, crypto banking will continue to grow and investors will have more confidence in their systems. As a result, we will see more innovations, new products and incorporation of cryptocurrencies and blockchain in the banking sector.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.