Publication time: August 27, 2020
Source of information: https://www.bai.org/banking-strategies/article-detail/how-banks-can-work-with-bitcoins-original-design/
For a long time, the banking industry has been cautious about assets such as digital currency, but now is the time for the banking industry to start embracing the current Bitcoin SV (BSV), which is a brand new business opportunity created by the original design of Bitcoin.
After years of technical debates in the digital currency community, the Bitcoin SV blockchain is expanding its capacity to handle a larger amount of data and massive fast transactions with low transaction fees. It is also committed to building a regulatory-friendly ecosystem, advocating compliance with KYC, AML and other relevant laws and regulations, so that Bitcoin can move from the "darkness" to the light and to the world.
So, what can banks do with this honest time-stamped ledger and the Bitcoin network with massive expansion capabilities?
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.
Remittance: BSV's time-stamped ledger can be used as a payment channel and settlement system to make international remittances cheaper and faster. BSV blockchain can provide customers with more efficient remittance and overseas payment methods, thereby replacing existing services.
Clearing and settlement: Financial institutions and their corporate customers can benefit from faster and lower-cost clearing and settlement processes. Banks can obviously benefit from the high efficiency of such systems.
Microfinance: Blockchain technology allows banks to provide small loans to small and medium-sized enterprises and merchants and consumers who have no bank accounts in developing regions, and it is economically feasible. Banks can issue small loans through smart contracts, automatically using a small part 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 cost.
Tokenize real-world assets: The Bitcoin SV ecosystem supports the tokenization of real-world assets, whether it is precious metals or commodities, or financial instruments such as stocks, bonds, derivatives, or structured securities. Banks can provide their customers with the most cutting-edge asset tokenization technology to take advantage of brand-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 believe this is a major advancement, the OCC only clarified the existing policy. This policy originally covered a series of custody services for physical and electronic assets, but now it has added a digital asset item. However, this still represents a positive cultural shift by major U.S. regulatory agencies, allowing banks to provide digital currency-related services 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 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 view of the industry may pave the way for banks to use custody services as a basis to provide a more comprehensive set of digital asset services.
For banks, through the vision of Bitcoin-namely, to build an honest transaction book, improve (rather than weaken) the efficiency of banks and governments, in order to better realize a new practical example of blockchain technology. 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.
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.
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