Blockchain is maturing as financial technology. As a result, more and more financial institutions experiment with the new type of digital infrastructure to improve their services.
Banks, insurance companies, and startups are all dreaming up new ways to implement blockchain into the current financial landscape. Here are some of the most interesting projects, and what their success could mean for the financial sector.
Blockchain: The Inevitable Financial Disruptor
Many people have agreed, right from its inception in 2008, that blockchain will revolutionize the way we manage finance. As the cryptocurrency market is expanding, this feeling is almost unanimous across all industries.
Over the years, blockchain has proven its robustness. It has the potential to operate securely at scale and deliver benefits that traditional ‘centralized’ networks simply can’t. It can offer financial institutions the means to:
- Reduce the cost of transactions;
- Cut out the middlemen in financial settlements;
- Build trust with clients;
- Achieve compliance more efficiently.
The big question now is not whether blockchain will disrupt finance, but how.
Financial institutions know that blockchain is set to change their role in the economy. So, they are diving headfirst into their own blockchain projects. The list of banks experimenting with blockchain technology is huge and growing quickly. Here are some interesting ones to keep an eye on.
Banks Using Blockchain
A whole consortium of Spanish banks is teaming up on a blockchain-based project. The list of banks includes Caixabank, Ibercaja, and Abanca. The aim of the project is to build a platform for identifying clients. When someone signs up for one of the banks for the first time, they’ll have their info recorded in the blockchain.
They hope the platform will improve the efficiency of operations and help them comply with European Data Protection Regulations. They also hope it will provide for a more seamless registration process and greater control over customer personal data.
JP Morgan made headlines when it released the first cryptocurrency backed by an international bank. The firm hopes that its cryptocurrency can be used to instantly settle transactions for clients. Interestingly, JP Morgan has recently been upgrading the blockchain behind its cryptocurrency to make it more accessible to more businesses. It has teamed up with Microsoft to build on Azure Network and bring blockchain technology to traditional banking.
China has had a hot-and-cold relationship with cryptocurrency. Now, some of its major banks officially deploy blockchain-based projects. China Construction Bank has recently redoubled its efforts on its blockchain trade platform. The intention is to provide a new type of financial infrastructure to aid Chinese exporters.
Agricultural Bank of China has started experimenting with decentralized loans. It issued the first-ever loan on a decentralized network in 2018.
Banks in the global financial hub of Hong Kong are also starting up their own blockchain projects. 7 Hong Kong banks and the Hong Kong Monetary Authority are launching a joint venture trade finance platform, one that uses crypto-technology to operate.
Other Blockchain-based FinTech Projects
The most well known blockchain-based project built specifically to shake up the financial sector is Ripple. It’s a platform built for all the key players in the financial sector: banks, corporations, exchanges, payment processors. The company started off as a ‘mainstream’ version of cryptocurrency, playing much more nicely with regulators and banks than Bitcoin. Now, the Ripple project is really starting to make waves in the financial sector.
The Ripple team has worked very hard to build strong relations with some of the largest financial institutions in the world. They want to make Ripple’s native cryptocurrency, XRP, the underpinning of fast and cheap transactions across the globe. Ripple’s blockchain technology is now making its way into central banks and even the IMF.
Defi: Replacing the Old
A buzzword evolving in the cryptocurrency space is ‘Defi’. Short for Decentralized Finance, it’s the idea of new projects attempting to disrupt the traditional finance industry by using decentralized infrastructure to deliver faster, cheaper, and more private services.
One of the most successful of these projects is Maker. It has the key goal of bringing its DAI ‘decentralized stablecoin’ to the market. A cryptocurrency token that is both decentralized and holds its value well — a very difficult thing to achieve.
There are also some major blockchain projects looking to change the way that money lending works. For example, Dharma uses smart contracts to build peer-to-peer lending platforms. This means that people can lend and borrow money from each other, without the need for banks or financial institutions at all.
There are many decentralized finance projects looking to shake up the way that global finance is done. These projects can bring additional options for consumers and greater competition for banks. But, there is even more potential for disruption in the developing world, where many people don’t have access to traditional financial services.
There’s an Exciting Ride Ahead
Bill Gates famously said that we tend to overestimate what we can do in 1 year and underestimate what we can do in 10. That’s certainly been the case for cryptocurrency in its early years, as people expected Bitcoin to change the world overnight.
Now, blockchain technology is really making its impact on the global financial sector. Banks are beginning to experiment with blockchain to deliver cheaper and faster services, startups are finding ways to deliver these services in new ways, and Defi projects are looking to leapfrog traditional financial services altogether. It’s certainly going to be an exciting ride in finance for the next 10 years.
