Blockchain, Banks And Other Financial Institutions
How Are Banks Actually Using Blockchain?
Many are planning to use RippleNet. Ripple has signed agreements with over two hundred banks and financial institutions. This is because blockchain in general, and Ripple’s technologies in particular, can save banks a great deal of money while improving customer experience. Banks tend to like things like that. A lot.
“Ripple confirmed it now has signed 200 banking and financial customer partnerships. In addition to Euro Exim Bank, it announced partnerships with SendFriend, JNFX, FTCS, Ahli Bank of Kuwait, Transpaygo, BFC Bahrain, ConnectPay, GMT, WorldCom Finance, Olympia Trust Company, Pontual/USEND, and Rendimento. Brad Garlinghouse, CEO of Ripple said:
“We’re now signing two — sometimes three — new customers per week. We also saw a 350 percent increase last year in customers sending live payments, and we’re beginning to see more customers flip the switch and leverage XRP for on-demand liquidity.”
Of the new partnerships, Ripple has said that JNFX, SendFriend, Transpaygo, FTCS and Euro Exim Bank, will use XRP for settlement as well as Ripple’s blockchain products. Ripple seems poised to be a key player in driving the mainstream use of cryptocurrency and blockchain technology in the global financial system.”
“Ripple, provider of leading enterprise blockchain solutions for payments, announced today that 13 new financial institutions have signed up for the company’s payment network, RippleNet. The companies include Euro Exim Bank, SendFriend, JNFX, FTCS, Ahli Bank of Kuwait, Transpaygo, BFC Bahrain, ConnectPay, GMT, WorldCom Finance, Olympia Trust Company, Pontual/USEND and Rendimento. With these additions, there are now more than 200 customers signed up for RippleNet.
JNFX, SendFriend, Transpaygo, FTCS and Euro Exim Bank will leverage the digital asset XRP to source liquidity on-demand when sending payments on behalf of their customers. Using XRP for liquiditywhen sending a cross-border payment helps financial institutions avoid the hassle of pre-funding accounts in destination currencies. It allows them to make faster, lower cost payments than they can through the traditional correspondent banking system.
For the financial institutions on RippleNet not currently using XRP for liquidity but interested in immediate settlement — such as CIMB or Olympia Trust Company — they are able to leverage Ripple’s technology and modern APIs for faster, lower cost and more transparent payments.”
For reference: Ripple, Use Cases, Banks
For more detail on the specific value proposition that Ripple promotes to banks, see the video below.
Other Banks Are Developing Blockchain And Cryptocurrency Solutions Internally
“Clients engaged us, saying they need a way to move money onto the blockchain,” Umar Farooq, who leads JPMorgan’s blockchain efforts, said in a telephone interview.
JPMorgan will control the JPM Coin ledger, and each coin will be backed by a dollar in JPMorgan accounts, giving the coins a stable value. That means JPM Coin will not be subject to the wild price volatility that has drawn speculators to other cryptocurrencies.
The bank is following in the footsteps of several smaller players that have introduced similar digital coins tied to the dollar. A consortium of European banks has been finalizing a similar product, Utility Settlement Coin, that would make it possible to move money between banks more quickly. Several cryptocurrency exchanges already have their own so-called stablecoins.”
And Guess Which organization has the most blockchain patents? The Ethereum Foundation? Microsoft? Facebook?
Nope. Bank of America.
JPMorgan created its own private blockchain solution, using Ethereum as its basis, and named it Quorum. When Microsoft needed a suitable blockchain to offer to its enterprise customers, as a service, via the cloud — it selected JPMorgan’s Quorum.
And here’s an overview from Forbes of 50 FinTech companies that are promoting blockchain technologies to banking and financial firms:
Stock exchanges and other trading exchanges are getting involved in blockchain and cryptocurrencies in a big way
The parent company of the NYSE (New York Stock Exchange), ICE (Intercontinental Exchange), is launching Bakkt, a Bitcoin futures startup that has raised $182.5 million, giving it a very high valuation — especially for a company that hasn’t launched its product, yet.
“Bakkt, ICE’s yet-to-launch crypto exchange, is being valued at around $740 million following its Series A funding round, sources close to the project tell The Block.
The exchange raised $182.5 million last year, pitching a futures trading platform geared at institutions. Its approximate $740 million post-money valuation means ICE may have sold up to 25% of shares to external investors like Galaxy, Pantera, Microsoft and Starbucks — the latter having contributed no capital in return.”
And the SEC just approved the LTSE, or Long Term Stock Exchange, based in Silicon Valley, which could have positive ramifications for blockchain and cryptocurrency startups.
Even exchanges as long-standing and conservative as the London Stock Exchange are getting involved.
“In an interview with CNBC, the LSE chief executive Nikhil Rathi said he was inspired by early blockchain initiatives at other stock exchanges, and sees the benefit of distributed ledger technology:
“You can certainly see distributed ledger technology having an application in the issuance process… I can see that technology being used in settlement too.”
LSE, the world’s sixth-largest exchange, has been surprisingly open to blockchain technology. Earlier in 2019, the exchange led a $20 million investment round in blockchain startup Nivaura.
It’s yet another sign that established financial institutions are warming to disruptive blockchain technology. A new future of trading is emerging. As crypto fund founder Anthony Pompliano claimed, “every stock, bond, currency and commodity will be tokenized.”
What’s happening in 2019 with banks and other financial institutions with respect to blockchain and cryptocurrency technologies is very similar to when businesses, in general, woke up to their need to implement Internet technology, in the late 1990s.
And as the Internet we all know is the Internet of information and communication, blockchain is the Internet of money and value-based transactions — and so, its first use cases with the highest near-term value propositions tend to be found with financial institutions, and/or startups in the financial services space.
Disclaimer: Please note that any mention of investment or trading is solely my personal opinion, and is not to be taken as investment advice, in any way. Also, please note that some posts may contain affiliate links for services that I use and recommend, which pay a small amount for the referral.
Doug Sandlin is a performance optimization consultant for startups, blockchain projects, and digital asset projects and investors. For more information, please visit https://dougsandlin.com