Bitcoin Association Founding President Jimmy Nguyen’s latest article was published on the Bank Administration Institute website. In ‘How banks can work with Bitcoin’s original design,’ Nguyen explores the numerous ways that banks can take advantage of Bitcoin, the only blockchain that can process great amounts of data and huge transaction volumes at a fast speed with low transaction fees.
What can banks do with Bitcoin?
Banks using Bitcoin are presented with a plethora of opportunities that can bring them new revenue streams, reduce their costs, as well as bring them new clients. We are already seeing banks use Bitcoin for consumer payments, remittances, clearance and settlement, micro-financing, tokenizing real-world assets, and more.
Because Bitcoin allows businesses and consumers to make transactions directly from peer to peer without a third-party intermediary, and because Bitcoin transaction fees are always a fraction of a cent (currently, the average tx fee is $0.0002), banks can use Bitcoin to make domestic and cross-border payments that cost less than a penny and are settled instantaneously.
The features of Bitcoin, as well as the U.S. Office of the Comptroller of the Currency’s (OCC) recent endorsement of digital currency, opens up a world of unprecedented opportunities for banks.
Digital currency derived bank offerings
In July, the OCC announced that national savings banks and federal savings associations in the United States are allowed to provide safekeeping and custody services for digital currency holdings.
Their announcement goes beyond simply providing custody for digital assets, and hints at banks being able to provide a range of products and services derived from their digital currency holdings.
“The OCC also recognizes that, as the financial markets are increasingly digitized, the need will increase for banks and other service providers to leverage new technology and innovative ways to serve their customers’ needs,” said the OCC in their official announcement. “By doing so, banks can continue to fulfill the financial intermediation function they have historically played in providing payment, lending, and deposit services.”
The OCC has acknowledged that digital currencies and blockchain technology are beginning to play a more significant role in our lives and that consumers have increased demand for both. As a result, the OCC is predicting that this trend will not slow down and that banks can create products that stem from their digital currency holdings which mirror the traditional financial products they currently provide, like loans.
Digital currencies like Bitcoin allow for never-seen-before opportunities in these traditional financial markets due to smart contracts that can facilitate contractual agreements automatically, without an intermediary, and micropayments which make it possible to create and send financial products in quantities never seen before since Bitcoin is easily divisible and has cheap transaction fees.
Nguyen takes a deep dive into the many ways that banks can—and are—using Bitcoin. You can find out how banks have been implementing Bitcoin by reading his article, ‘How banks can work with Bitcoin’s original design.’
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