When we think of cryptocurrency and banks, the relationship we picture generally isn’t a positive one. It’s the same kind of sweet, wholesome bond as the one between Batman and the Joker, stretching back for many years.
You could be forgiven for thinking that traditional financial institutions are willing to do just about anything to discredit this technology and turn the public away from it.
In fact, in the face of such fierce opposition, it’s kind of a wonder that crypto has managed to do so well, with the price of Bitcoin continuing to soar and new ICOs springing up all the time.
Recently, and perhaps inevitably, even the banks have begun to accept this new kid on the financial block. They haven’t come out and outright endorsed Bitcoin, though —it’s a little more subtle than that.
The technology that is slowly winning the financial establishment over is blockchain.
In spite of all the smearing directed at crypto, blockchain has managed to keep its name more or less clean. Perhaps because the technology isn’t necessarily tied to cryptocurrency, it’s been eyed up by a range of parties from the U.S. Military to the healthcare industry.
And now, at long last, it seems to be falling into the laps of some big Wall Street players.
Blockchain on Wall Street
A blockchain startup called Axoni were the group responsible for bringing blockchain into the lion’s den of finance. Working with Goldman Sachs and JP Morgan Chase, they oversaw a six month trial of blockchain in the equity stocks market.
During this time, the technology was used to manage swaps contracts, measuring things like amendments and termination of deals. It achieved a 100% success rate, a figure that’s hard to argue with by any measure.
In a market worth $2.9 trillion, blockchain has the power to significantly reduce back-office operations and speed up many elements of the trading process.
So how does it work? Basically, banks and asset managers join together to form a network —not too dissimilar from those we see in ICOs. The network uses blockchain as a distributed ledger with all the information about payments and transactions, and this information is available to everyone in the network.
Whenever a transaction takes place, the ledger updates, and the changes are immediately noticeable to anyone with a copy of the blockchain. This means payments can be processed in real time, something that would previously take much longer.
This has the potential to make trade times a whole lot more efficient, saving billions of dollars. Accenture estimates that investment banks could save $8 billion as a result of this technology.
A Snowball Effect?
Axoni’s test isn’t the only blockchain-related success story to come out of Wall Street recently. Last week, KPMG signed on as a member of the Wall Street Blockchain Alliance (WSBA), a trade organization that aims to promote and raise awareness of blockchain in finance.
Ron Quaranta, chairman of the WSBA, was optimistic about the news, saying: “We are truly grateful to have KPMG join the WSBA family as a corporate member. As one of the world’s leading professional services companies, KPMG sits at the cutting edge of blockchain innovation across multiple segments of the global economy.”
KPMG, who also gained themselves a seat on the WSBA board of directors, are one of the ‘big four’ audit firms. It’s interesting to see monolithic financial companies publically coming out in support of blockchain, a big change from the cagey attitudes of the past.
So, what does this mean for blockchain and cryptocurrency? At this point, it’s still very much early days, and it’s impossible to say anything for sure. There’s still a fair amount of negative press and condemnation of cryptocurrency circling around, and it’ll probably be a while before established financial bodies are prepared to say anything TOO complimentary about it.
The adoption of blockchain in the industry, however, is yet more evidence of the technology’s potential and scope for application in a wide range of areas. It’s possible that news of big names implementing blockchain will spur others into action, leading to a snowball effect.
Maybe the most important quote from these events has come from Greg Schvey, Axoni’s CEO: “We’re on a path to take this forward. We know the thing works now.” This short but powerful statement highlights a key turning point where the doubt and scepticism around blockchain begins to gradually ebb away.
If banks are able to use blockchain to generate results as impressive as those above, that’s a pretty solid accolade, and it’s difficult to imagine a future where it doesn’t play an important role.