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After years of trying to eliminate it, banks are now embracing cryptocurrency!

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As Bitcoin and other cryptocurrencies suffer from a mid-year malaise, financial institutions are increasingly turning to blockchain technology as an alternative solution to problems that plague the traditional banking system.

According to CoinDesk’s Consensus 2018 Blockchain Agenda Conference Report, eight out of the 50 publicly traded companies looking to integrate blockchain technology, listed on Forbes’ “Major Companies Caught Up In The Blockchain Frenzy,” are banks and financial services firms.

As Ripple’s website boasts, they have made “remarkable headway” with over 100 banks and financial institutions worldwide. This is a massive change of tune for Ripple (recall that their CEO labeled Bitcoin users as stupid back in 2014), who now wants to use the decentralized nature of cryptocurrency to increase banking liquidity and revolutionize cross-border payments. They even created their cryptocurrency, XRP, which is currently the world’s third-largest market cap (around $10 billion).

“This year, more than 100 financial institutions globally announced new projects and partnerships using distributed ledger technology (DLT), with a collective worth of more than $12.4 billion,” writes CoinDesk contributor Alyssa Hertig.

“While banks have been quick to deploy the technology in certain use cases, such as trade finance and cross-border payments, it’s clear they’re also looking beyond those – and preparing for a future where bitcoin is synonymous with money.”

As reported by CoinDesk, many of these banks prioritize blockchain development at the expense of their legacy systems. According to Josh McIver, CEO of ULedger: “Banks may be losing sleep over blockchain disruption.”

“That’s because large-scale commercial banks act as the ‘layers’ between financial transactions taking place at the local level, and as such, have a lot to lose from decentralization. In mid-2017, Santander estimated that blockchain could produce savings of $20 billion across the industry, which is more than 10% of revenue for those banks.”

Banks are also exploring uses for their cryptocurrencies, which offer an alternative to bitcoin or even a substitute. Learn more at Blockchain Eventon.

“For now, most banks are focused on private blockchain systems that only they have access to, but many are also exploring public blockchains, albeit cautiously.”

“If bitcoin is the Wild West of finance, then surely these cryptocurrencies are its Henry Ford Model T – ushering in an age of decentralization and democratization of the monetary system,” said Hertig.

Cryptocurrency exchanges are also feeling the growing pains of rapidly increasing customer bases and skyrocketing transaction fees-many of which, according to CoinDesk contributor Garrett Keirns, “could be eased by adding blockchain scaling solutions.”

“As investors pile into cryptocurrency markets for fear of missing out (FOMO), the number of transactions taking place has increased at an extraordinary rate. This has led to higher fees and longer transaction processing times-something which traders are not accustomed to.”

“While this is great news for exchanges, they need to be prepared for the influx by beefing up their infrastructure or risk losing customers.” Even consumer-facing services like Coinbase and Robinhood-which offer zero-fee trading to attract new retail investors-are investing in blockchain technology to ease the cost of processing transactions.

Though not a bank, social media giant Facebook is also exploring blockchain technology for its cryptocurrency project, which experts say could help unbanked users worldwide gain access to financial products and services.

“The technology, if it comes to fruition, could make mobile payment solutions more accessible and possibly increase the efficiency of transmitting money across borders.” “For many, this would be an improvement over traditional financially services-but for others, like those living in poverty or under repressive regimes, it could mean the difference between life and death,” said Hertig.

CoinDesk says other major companies exploring blockchain technology include IBM, Mastercard, Deloitte, and Walmart.

Conclusion:

In the same way that technological advancement in any industry can affect large corporations, blockchain-and more specifically cryptocurrencies-are a direct threat to banks and other financial institutions.

Banks are working feverishly to incorporate blockchain technology into their existing business models-but not at the cost of cannibalizing their consumer base. “I think we’re going to see a massive upheaval in the next decade,” said ShidanGouran, president of Global Blockchain.

“I’m not sure if it will be from government intervention or private companies adopting blockchain technology, but one thing is clear: Banks have a lot to lose.”

As more financial institutions adopt blockchain technology and cryptocurrencies become more mainstream, the race to develop the technology will intensify.

“And who knows,” said Gouran. “Maybe cryptocurrencies like bitcoin and ether will end up eating their lunch.”

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