Published: September 14, 2020
Source: BitcoinAssociation.net
The banking industry has always been wary of digital currency assets, but they don't have to. Although banks and Bitcoin are not regarded as a clear combination, and the reasons for it are easy to understand, it is time for banks to start embracing the large number of new business opportunities brought by Bitcoin—at least in its original design, namely This is now possible on Bitcoin SV (BSV). In the field of digital currency, some early influential people mistakenly described Bitcoin as subverting the banking system, but those "cypherpunk" remarks did not understand the true purpose of Bitcoin. Bitcoin has never been anti-banking. It created a public ledger system with time-stamped records to prevent fraud and bring more honesty to the business world. With Bitcoin SV, "Satoshi Vision" was finally restored. In the honest Bitcoin world, there are many valuable business opportunities in the banking industry.
The original design of Bitcoin was an honest ledger system
In 2008, Satoshi Nakamoto showed the world the design of a revolutionary peer-to-peer electronic cash system in the original Bitcoin white paper. But Bitcoin is not just a digital currency, it is also a network protocol, just like the Internet protocol, it is the basic set of rules for the entire data network. In fact, Bitcoin transactions represent the fusion of data "bits" and monetary value "coins". Payment and data transactions are recorded on the blockchain. Blockchain is a distributed ledger that is maintained by multiple nodes in a global network rather than a single authority (such as a central bank or commercial bank). As stated in Satoshi Nakamoto's white paper, the ledger is a distributed "timestamp server" that records transactions in chronological order. Although confidential information can be encrypted, the history of the ledger is public, auditable, and verifiable.
Bitcoin's public time-stamped ledger is not anti-banking or anti-government. Instead, financial institutions can use the system to encourage more honest transactions. (Reading the Bitcoin white paper, you will find that the word "honest" has been used 15 times.) After years of fierce debate in the digital currency community, Bitcoin SV has now carried out a large-scale expansion of the blockchain so that the blockchain can Fast processing of larger amounts of data and massive transactions at extremely low fees, even transactions of less than one cent. Expansion is necessary to support financial institutions and other companies to use Bitcoin's data protocol to create different practical examples. Bitcoin SV is also committed to building a regulatory-friendly ecosystem, advocating compliance with KYC, AML and other relevant laws and regulations, so as to allow Bitcoin to move from the "darkness" to the light and to the world.
What can banks do with Bitcoin?
So, what can banks do with this honest time-stamped ledger and the Bitcoin network with massive expansion capabilities? The answers are numerous.
- Customer payment : Banks can regard BSV as the most efficient global digital currency, enabling instant domestic and cross-border payments, while the cost of payment is less than one cent. Banks can provide Bitcoin wallet support services to facilitate the use of BSV for their customers, merchants, and new digital payment services.
- Bitcoin SV can conduct real-time transactions with extremely low fees. Its time-stamped ledger can be used as a payment channel and settlement system, making international remittances cheaper and faster. Centbee is a BSV wallet and payment company in South Africa. It uses BSV to provide a cross-border remittance service with a service fee of less than US$1 per transaction. Similarly, banks can use Bitcoin SV blockchain (or use third-party services) to create more efficient remittance and overseas payment methods for customers, thereby replacing existing services.
- Clearing and settlement : It is not only consumers who want a more efficient cross-border transfer system based on Bitcoin SV's public ledger. Financial institutions and their corporate customers can also benefit from faster and lower cost clearing and settlement processes. The higher efficiency of such systems can obviously bring more benefits to banks.
- Microfinance and microfinance : Blockchain technology allows banks to provide small loans to small and medium-sized enterprises and merchants and consumers who do not have bank accounts in developing regions, and it is economically feasible. Given Bitcoin SV's transaction speed, extremely low transaction fees and smart contract capabilities, it is particularly suitable for this use case. Banks can issue small loans through smart contracts, automatically using a small portion of the borrower's continuous income to repay the loan-which not only speeds up the repayment speed, but also reduces the lender's collection costs.
- The assets of the real world through evidence : Bitcoin SV ecosystem support assets through real-world evidence of, and a variety of Token protocols available. For example, the Tokenized protocol on BSV is a regulatory-friendly solution that can certify multiple types of real-world assets-whether it is precious metals or commodities, or stocks, bonds, options, futures, real estate mortgage loans Securities or financial instruments such as secured debt certificates are irrelevant. The Bayesian Group, a financial technology company headquartered in Toronto, Canada, is using the Bitcoin SV blockchain as the underlying ledger of the "Tokenized Everything" ecosystem to provide support for convenient transactions of all digital assets and an open financial system. Banks can provide their customers with the most cutting-edge asset tokenization technology to take advantage of new business models.
Positive custody signal from the Office of the Comptroller of Currency (OCC)
In July 2020, the US Office of the Comptroller of the Currency (OCC) issued an open letter clarifying that the Federal Chartered Banks and Savings Association have the right to provide customers with cryptocurrency custody services. Although some media observers consider this to be a major advancement, the OCC only clarified existing policies. National and state banks and savings institutions could provide custody services for any type of physical and electronic assets, but now they are only increasing. A digital asset item. Because the OCC found that “holding the only encryption key associated with cryptocurrency is a modern form of traditional bank custody service.” Although this is not breaking news, it still represents a kind of major regulatory agency in the United States. Positive cultural changes have allowed banks to provide services related to digital currencies with confidence.
More importantly, OCC pointed out that when providing custodial services for digital currency trustees, “banks can continue to play the intermediary function of providing payment, loan and deposit services in the past.” This directly recognizes that banks can trade in new digital assets. All areas in the ecosystem play a role, and safekeeping is only one link in this process. In fact, the OCC’s open letter draws an analogy with a securities custodian. Its responsibility is not only to ensure the safety of assets, but also “usually to conduct transaction settlement, invest cash balances in accordance with instructions, collect income, process corporate actions, and conduct securities positions. Set prices and provide record keeping and reporting services."
In the short term, we are unlikely to see a wave of digital asset (custodial only) services from banks. However, in the long run, OCC's increasingly open attitude towards the industry may pave the way for banks to provide a more comprehensive set of digital asset services (such as the above five types of services) based on custody services.
For banks, the new commercial practical examples of blockchain technology are endless. Through the vision of Bitcoin-that is, like today's Bitcoin SV, through large-scale expansion, an honest transaction book can be established, and the efficiency of banks and governments can be improved (rather than weakened). In order to better realize the brand new blockchain technology Practical example. Just as the Internet protocol opened a new era of digital communication and e-commerce, the Bitcoin protocol has brought a new paradigm for asset custody, fund transfer, asset tokenization, smart contracts, and financial products. This is a brand new world, and banks will definitely benefit from it. All they have to do is to take advantage of the brand new business opportunities brought by Bitcoin SV with an open mind.
Jimmy Nguyen is the founding chairman of the Bitcoin Association. The Bitcoin Association is a global industry organization headquartered in Switzerland that aims to promote the development of Bitcoin SV digital currency and blockchain. Jimmy is a well-known supporter of Bitcoin and was the CEO of nChain, a global leader in the research and development of enterprise-level blockchain solutions. Prior to this, he worked as an intellectual property and digital technology lawyer for 21 years and served as a partner in three major US law firms.
Editor's note: The edited version of this article was first published by the Bank Administration Institute.
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