Last Updated on
Although interest in blockchain technology from large banking institutions seems to be at an all-time high, not many of the blockchain projects currently in development at these banks are using Bitcoin — the world’s most popular version of the technology. Many financial institutions seem interested in private blockchains or permissioned ledgers, and not many of them are willing to talk about any sort of integration with bitcoin (the digital currency).
Digital Currency Group Founder and CEO Barry Silbert recently discussed the use of blockchains among banks on the Keiser Report, and he claimed that banks who are not using Bitcoin are making a mistake.
Banks Will Come Back to Bitcoin
Before getting into the reasons as to why banks are avoiding the Bitcoin blockchain, Silbert claimed that these financial institutions will eventually come to the right decision. He explained:
“All these banks are trying to get the best attributes of the Bitcoin blockchain without the bitcoin, and ultimately, I think they’re going to capitulate and revert back to the Bitcoin blockchain.”
Although most banks don’t seem interested in integrating bitcoin into their current setups, Silbert claimed that, ironically, the people working on blockchain-related projects at financial institutions are holding bitcoin personally. He stated:
“The funny this is, if you talk to the people working at these places, all of them own bitcoin personally.”
Why Banks Aren’t Using the Bitcoin Blockchain
Silbert also went into detail on why banks are choosing not to use the Bitcoin blockchain right now. He pointed out two aspects of Bitcoin that worry bank executives:
“The reason why they’re trying to not use the Bitcoin blockchain is they’re worried about Chinese miners not securing the network properly [and] they’re worried about indirectly paying terrorists for mining bitcoin, which supports the network.”
Bitcoin as a brand is a bit tarnished because of Silk Road, MtGox, and other parts of the industry, which have been perceived negatively by the general public. For this reason, many companies, developers, and investors have started to refer to Bitcoin as the blockchain.
A Shared Database is Not Transformative
Barry Silbert also noted that what banks are doing with private blockchains is not all that exciting. He compared these permissioned ledgers to shared databases:
“Ultimately, what they’re talking about — it’s just a shared ledger; it’s just a shared database, which, in my opinion, is not very transformative. We have to rethink what a bank is and the role that they’re going to be playing ten years from now, and the path that they’re going down, to me, is not really that transformative.”
Bitcoin’s open and permissionless nature is what has driven so many people to the blockchain over the past few years. Private blockchains may offer better efficiency behind the scenes for banks in the near future, but it’s also possible that all they’re doing is improving an outdated system.
Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, RT’s Keiser Report, and many other media outlets. You can follow @kyletorpey on Twitter.