When cryptocurrencies first emerged onto the scene in 2009, it was with little fanfare. Even one year after Bitcoin’s invention by the mysterious Satoshi Nakamoto, the price of a single Bitcoin was still less than 50 cents. It has only been in the last couple of years that cryptocurrencies have drawn the attention of those outside the immediate community, attracting ordinary consumers, businesses and institutions alike.
When crypto-mania broke out last year, Bitcoin and other cryptocurrencies rose to unforeseen valuation levels. At first, leading financial institutions remained highly sceptical. Most infamously, in September 2017 the JPMorgan Chase CEO Jamie Dimon denounced Bitcoin, calling it a “fraud”, but in January 2018 said he regretted those statements.
Likewise, having started out dismissive of cryptocurrencies or viewing them as a threat, some banks are changing their tune and searching for ways to take advantage. For example, Dimon’s own firm, JPMorgan Chase, is investing in blockchain. For the past two years, the bank has been looking into a variety of blockchain implementations including Ethereum and Zcash, and just last month, a new role called the Head of Crypto-Assets Strategy was created, held by Oliver Harris who previously presided over the fintech startups programme. They’re well placed to develop serious applications: globally, JPMorgan Chase employs more than 50,000 technologists – almost double the total number of employees at Facebook.
In terms of the UK-based banking giants, Barclays has proven itself to be a pioneer for cryptocurrency integration, through its ground-breaking partnership with popular cryptocurrency exchange Coinbase to provide them with access to the Faster Payments Scheme. However, while Barclays is ahead of its bigger competitors, the reality is that smaller fintech companies are already a few steps ahead.
Challenger bank Revolut has been offering customers access to Bitcoin trading since December 2017, and it recently added Ripple and Bitcoin Cash trading as well. Revolut seems confident in continuing to move in a pro-cryptocurrency direction.
Even more pro-cryptocurrency was new challenger Fiinu, which planned to raise funds to support its vision of a smart contract backed loan business via an ICO for November 2017. This ICO was later cancelled for technical reasons, but the chief executive, Marko Sjoblom says that after getting a banking licence (planned for late 2018) Fiinu wants to “bridge the gap between banking and the crypto world… [and] allow you to access the crypto-world without having to go underground and potentially falling victim to some of the fraud that is happening in that world”.
With the above examples in mind, the challenge for the banks is now one of speed if they want to attract customers looking for cryptocurrency features.
The first potential strategy banks can consider is to develop an in-house application, committing significant time and cost to develop different blockchain integrations. Alternatively, banks can turn to third-party services that are already designing for integration of cryptocurrency features into banking or investment applications, such as CREALOGIX’s Invest Crypto offering. Leveraging existing technology saves time and resources and can drastically cut financial institutions’ time to market for new products and services.
There’s no question that cryptocurrencies and the blockchains that underpin them are here to stay and the potential for disruption is only just starting to be explored. The blockchain-as-a-service market is expected to reach a market value of $15.5bn by 2023, up from $350m last year, while the cryptocurrency market as a whole is already worth billions. The real question is: which banks will react in time to get a share of the spoils?
