Banks are increasingly relying on blockchain

A WSJ report explains how traditional banks, despite not yet embracing cryptocurrencies, are using blockchain technology for its operations.

Banks and Blockchain, between traditional finance and DeFi

In September 2017, Jamie DimonCEO of JPMorgan Chase mocked Bitcoin:

“It’s worse than tulip bulbs. It’s not going to end well. Someone’s going to get killed.”

The statement refers to the Dutch tulip market bubble from the 17th century.

Lloyd Blankfeinsenior chairman of Goldman Sachs, had in turn echoed him, saying:

“Something that moves 20% [overnight] does not look like a currency. It is a vehicle for committing fraud.”

This represents well what was the general opinion of the major investment banks towards cryptocurrencies, which were considered to be a fraud or otherwise a purely speculative and transitory phenomenon.

This perception has changed over time, and now the banks, although they are always watching the world of cryptocurrencies with some suspicion, has nevertheless changed his attitude. However, what does not seem to have changed is the tendency of banks to look with increasing interest at the technology behind cryptocurrencies, namely Blockchain.

In a very recent report, the Wall Street Journal explained how major investment banks are turning to blockchain develop their services and make transactions faster, cheaper and more secure. From what we can see from the report, payments are the first and foremost use case of blockchain for banking and finance.

When it comes to blockchain finance, central and commercial banks around the world are now exploit this new technology when it comes to payment processing and potentially issuing their own digital currencies.

Blockchain enables faster and more transparent and simple transactions, which is why banks are increasingly implementing this technology in their payment systems.

The benefits and potential of blockchain

But Blockchain is widely used, even experimentally in the traditional stock market process, which often requires long procedures to complete. However, the decentralized nature of blockchain technology in banking can remove all these unnecessary intermediaries and allow trading to be carried out on computers all over the world.

No more dedicated servers connected to an interconnected network. Not to mention everything related to customer identification process. Blockchain can actually be a very important asset for banks to reduce costs associated with human error and bureaucracy. By the way, some people wonder why it was not adopted earlier than traditional banking.

Wall Street Journal columnist Paul Vignathe author of report on blockchainsays:

“I think what’s interesting is that it’s not actually a, why are they doing this now? It’s more like, why are they still doing it? They have actually been on this path for several years now. They have experimented with blockchains, with the technology and concepts behind Bitcoin and other cryptocurrencies. The main reason they do this is because it potentially benefits their business.”

Big banks involved

Also according to the long and detailed report by the American business newspaper, the bank that seems to focus most on blockchain technology so far has been Goldman Sachs, but JP Morgan and rendering also seem to be investing heavily in implementing the technology into their processes.

Most major banks and financial institutions have some sort of group dedicated to digital assets, working to figure out how to use the technology.

JP Morgan, for example, which is specifically mentioned by Vigna in his article, has a platform based on blockchain concepts called Onyx, which they have been using for a couple of years now. They also have a small desk department that does real transactions, which they have reportedly already processed 350 billion dollars value of transactions.

Goldman Sachson the other hand, has reportedly issued some bonds through the blockchain, up to $200 million with the European Investment Bank.