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Blockchain: Financial Services Being Forced to Redefine Themselves

By Dick Weisinger

The rise in popularity of Bitcoin and other crypto coins and currencies is getting business and government to reevaluate crypto and how they should address it.

Financial service companies in particular worry that cryptocurrencies could be a threat to their business models. Currently banks and financial services centrally manage large amounts of money belonging to many different accounts. Cryptocurrencies are decentralized. Instead of one central entity, all blockchain members are able to access the information stored on the chain.

Linda Pawczuk, principal, Deloitte Consulting LLP, said that “in the last year, we’ve seen a significant shift in how the global financial ecosystem is thinking about new business models fueled by digital assets, and how this is playing a meaningful role in financial infrastructure. The foundation of banking has been fundamentally outlived and financial services industry players must redefine themselves and find innovative ways to create economic growth in the future of money.”

Bank of America, for example, in a financial filing with the SEC, noted that cryptocurrencies could have negative impact on their business and the way that they conduct transactions. First, cryptocurrency makes it difficult for the Bank of America to comply with anti-money-laundering laws. Second, cryptocurrency valuations are very volatile and can be considered speculative or risky. And third, funds may move from traditional accounts into cryptocurrencies which means less business and fees for the financial services company. The last item is likely the biggest worry for financial institutions.

A similar report released by BNP Paribas describes cryptocurrencies as a threat that could potentially make their services less relevant or redundant.

Brian Brooks, acting Comptroller of the Currency (and former Chief Legal Officer at CoinBase), said that “like other technology developments in the past, there was the potential for criminal activity. There’s also an enormous potential for economic growth. So we don’t want to throw out those advantages because there’s a chance for criminal activity. Instead, we want to give compliance guidance to help banks innovate.”

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