The advent of cryptocurrencies has caused a fundamental shift to a lot of companies and industries, and now, it seems that crypto assets have become so big that banks are currently looking into the possibility of launching their tokens. Yesterday, David Solomon, the Chief Executive Officer of banking giant Goldman Sachs confirmed to French newspaper Les Echos that the bank was looking into tokenization.
The statement speaks to the extensive effect of crypto assets. Banks, which didn’t consider these assets as competition years ago, are coming to acknowledge that the assets exist and could very much make them obsolete.
Clear and Present Danger
The sentiment was shared by Jamie Dimon, CEO of JPMorgan Chase. In a recent interview with Yahoo Finance, the once-ardent critic of crypto said that blockchain and cryptocurrencies are real, and the competition is very much existent. It’s worth noting that JPMorgan now has the JPM Coin, a digital asset which helps with cross-border payments. It might not be used for trading or have any retail use yet, but they have a foot in the door and this makes all the difference in the world.
It’s quite understandable that commercial banks are feeling threatened by cryptocurrencies in general. Beyond the disruptions to financial markets, crypto assets, by their very existence are seeing more use cases every week, going deep into the most fundamental banking functions, and if things aren’t careful, banks stand to lose a whole lot.
There are a lot of examples of this sentiment, the most recent is Facebook and its hotly contested Libra stablecoin that was announced recently.
Libra is a cryptocurrency like no other. Facebook managed to partner with an army of large companies, including cryptocurrency exchanges, to launch a cryptocurrency that would, among other things, champion cross-border payments.
The cross-border payments industry is estimated to be worth a staggering $10 trillion this year, and so far, banks have been able to harness this industry as they please. However, the cross-border transfer industry leaves a lot to be desired when it comes to efficiency; transfers cost a lot and are slow, and it’s not like banks would like to do much to help with this. Until Libra.
Automated trading, also referred to as algorithmic trading has also grown in popularity recently, with the rise of software such as Bitcoin Future and Bitcoin Evolution. These software use complex algorithms and mechanisms to scan the Bitcoin markets, read signals and make decisions on which trades to place in order to provide returns, with no intervention or experienced needed from the investor. These automated trading tools have made it possible for complete beginners to trade cryptocurrencies in the click of a button, allowing more people to access the crypto markets and further expanding the industry into what it is today.
Real-time Payments for EU Banks
The stablecoin has forced many banks to sit up, and they’re already making changes. Earlier this week, Etienne Groosse, the Director General of the European Payments Council (ECP), confirmed to Reuters that European banks are now set to deploy a real-time payments infrastructure that will significantly boost the industry and give customers a much more fulfilling experience. So what caused this sudden commitment to speed? We can speculate and say the increase in Bitcoin trading and the imminent launch of stablecoins like Libra. It’s interesting to see how this battle plays out. However, at this point, it’s safe to say that the sides are known. Everyone will have to select.