Euro Banking Association Extols Benefits of Collaboration Between Banks & ‘Cryptotechnology Community’
A recent report by the Euro Banking Association (EBA) makes the case for Europe’s banks and traditional financial service providers to increase levels of co-operation with the current cryptotechnology community.
Of course this is far from the first time a prominent player in high finance has come out to publicly recognize the potential of blockchain technology and other recent innovations in digital currency. In the past week, for example, NASDAQ announced a pilot program to experiment with the use of ‘Coloured Coins‘ for the trading of stocks and shares over the Bitcoin blockchain. This itself seemed to present a significant step forward in the acceptance of Bitcoin by high finance, as it represents the first time that a major player has discussed not only adopting the ‘underlying technology’ which drives Bitcoin, but potentially making use of the Bitcoin blockchain itself.
Whilst a month ago it would have been easy to presume that any adoption of blockchain technology by high finance would most likely involve the development of their own in-house systems and blockchains / ledgers, it now looks increasingly likely that banks, stock exchanges and other big players are more likely to consider directly adopting currently available technology and making use of current blockchains — potentially including many of today’s more successful alt coins.
In its recent report, the EBA acknowledges that cryptotechnology is “more than just a passing trend”, suggesting that its potential is greater than an observer of the current climate may think due to the fact that the industry is being held back by regulatory uncertainty. It identifies a range of different areas where decentralized technology may prove superior to current banking systems which it admits where developed in an era when records were kept on physical paper rather than on computers. One image included in the report details these different areas and includes reference to a range of projects involved in these areas:
The report goes on to identify four possible scenarios for the future development of cryptocurrency technology.
In the first scenario, labelled ‘Out in the Cold’, cryptocurrency projects are allowed to keep developing largely within a parallel ‘cryptoconomy’ separate from the traditional finance industry. Describing this scenario the EBA seems to express a fear that it may end up being traditional finance ‘left out in the cold’ as the report warns that cryptocurrency services could be offered ‘at a fraction of the cost’ of traditional services, and warns that regulation may work against the banks rather than in their favour, “due to the fact that cryptotechnologies are perceived to be better positioned to take advantage of external changes”.
A second scenario dubbed “First Among Equals” describes what would happen if banks attempted to adopt the technology behind cyptocurrency without collaborating with current industry leaders and cryptocurrency communities, concluding again that the banks would come off second best as they “would most likely find themselves in a (fast) follower position by default.”
In a third scenario banks are ‘”awake and aware” to the changing technological landscape and engage in “partnerships in selected areas”. Although generally positive, the report concludes that within this scenario “full adoption is unlikely to emerge.”
A fourth scenario dubbed “United We Stand” appears to describe the perceived benefits to both banks and “the cryptotechnology community” of a collaborative approach.
Could this mean the banking industry directly adopting Bitcoin and even alt coins such as those mentioned in the report?
Originally published at cryptonewsday.com on May 14, 2015.