Tags: Banks | Bitcoin | Blockchain | digitial virtual currency

Study: Banks Could Use Bitcoin Technology by Next Year

Study: Banks Could Use Bitcoin Technology by Next Year

By    |   Wednesday, 11 November 2015 08:53 AM

Capital markets could adopt the technology behind the bitcoin digitcal currency as early as next year, revolutionizing the industry by enabling more secure transactions and creating new streams of revenue, a new report predicts.

The report by market consultancy TABB Research claims that the adoption of the so-called blockchain adoption is now a matter of “when, and not if.”

The blockchain was developed to be used with the cryptocurrency bitcoin. It works like a huge, decentralized ledger that records every transaction and stores this information on a global network so it cannot be tampered with, CNBC explained.

A consortium of more than 20 banks led by financial technology company R3 is developing a framework for applying blockchain technology to markets, CNBC explained.

The report predicts blockchain solutions will be applied to track syndicated loans by the second quarter of 2016, but added that other market sectors may take longer.

For example, applying blockchain to derivatives will take up to five years to develop, while using blockchain to settle share trading is a decade away, CNBC explained.

Blockchain is highly scalable and secure and relies on encrypted distributed ledgers to ensure accuracy and transparency, which only works in its favor, said Shagun Bali, the TABB research analyst who co-wrote "Blockchain Technology: Pushing the Envelope in FinTech."

"Blockchain technology has the potential to change the way the industry tracks, clears and settles many of the institutional capital markets electronic transactions, disintermediating the need for an independent third party," Bali wrote.

"Within capital markets, a number of top use cases are coming to the fore, opening new opportunities for efficiency and generating revenue from greenfield projects, including private equity, interbank payments and corporate debt, among others."

"The blockchain landscape and evolving ecosystem present a unique opportunity and a fundamental foundational element for additional innovation in financial markets, says Bali.

"However, further due diligence for defining industry standards with regards to settlement, counterparty and other transactional risks involved are critical. As blockchain gains greater mainstream adoption, a strong regulatory framework will be necessary to maintain a balance between security and future mass-market blockchain scalability, a critical industry challenge that lies ahead."

To be sure, the market has seen revived interest in bitcoin as the digital currency finally seems to be catching on with the financial establishment, Bloomberg reported.

There is enhanced interest and acceptance from established financial companies. Much of this is due to the blockchain technology, which Goldman Sachs, Morgan Stanley, and a number of other firms have taken an interest in as they seek to apply it to overhauling the trading of securities, derivatives, and loans.

Other experts are speculating that the economic situation in China could be fueling the rise as market turbulence encourages local investors to get creative when it comes to moving their money out of the country. Bitcoin offers one potential avenue around capital controls.

Adding to the positive sentiment is a recent decision from a top European Union court, which ruled that exchanging virtual currencies should be exempt from value-added tax in the same way as traditional cash. Basically, this levels the playing field a bit between bitcoin and traditional money, Bloomberg reported.

The bitcoin traded at $322.93 Wednesday morning, according to CoinDesk, after dropping to a low of $308 in the last 24 hours.

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Capital markets could adopt the technology behind bitcoin as early as next year, revolutionizing the industry by enabling more secure transactions and creating new streams of revenue, a new report predicts.
Banks, Bitcoin, Blockchain, digitial virtual currency
Wednesday, 11 November 2015 08:53 AM
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