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Banks And Bitcoin

Banks And Bitcoin

As explained at the end of the previous article, “Blockchain and Thai Cryptocurrency Investment”, Thailand opened to cryptocurrency and blockchain technology in 2018 after issuing a Royal decree that requires businesses engaging in crypto to register with the Securities and Exchange Commission. The Thai regulatory framework has gained a good reputation in the region as enough regulations have been put in place to attract investors but not so many legal hurdles to stay in the way of promoters and developers.


Meanwhile, on February 14 of this year, as many were celebrating Valentine’s Day, JPMorgan Chase became the first major US bank to unveil its own cryptocurrency, the JPM Coin. Each token will be valued at one US dollar once the blockchain project begins testing as reported by CNBC.


With this move, JPMorgan Chase takes the lead in American real-world crypto banking, which as Umar Farooq, the head of JP Morgan’s blockchain projects told CNBC as reported in the New York Times, investors “will be better able to consolidate their money and get better rates for it.”


Well before this in Thailand, in July 2018, IBM and Krungsri Bank, one of Thailand's largest financial institutions, announced a five-year US$140M investment in digital banking with other projects in store, the most interesting being Project Inthanon, which aims to develop a wholesale central bank digital currency (CBDCs) running on blockchain as a new channel to conduct interbank settlements.


Bitcoin, like all coins, is based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies). With these attributes, all that is required for a form of money to hold value is trust and adoption.

As with all currencies, Bitcoin's value comes only directly from people willing to accept them as payment. In reality, what was supposed to be a decentralized form of money reverted in a system controlled by just a handful of people. This community, in the case of Bitcoin, has failed and the peer-to-peer network has had to succumb to speculative trading and investments. Moreover, the limited scalability and excessive cost of mining have made it impossible to deliver the promised fast transactions.

Regardless, Bitcoin gave us blockchain, which we now know is a reliable means of storing data about other types of transactions such as property exchanges, stops in a supply chain and election votes.     Moreover, the nature of an open, decentralize economy powered by a blockchain is very much in line with business models that use platform systems to create value by facilitating exchanges between interdependent units. Even more important, in the near future, the blockchain will allow companies to stay relevant by fully embracing an “ecosystem economy” where companies can integrate core business functionalities with third party networks and platforms.


Despite its many uses, blockchain’s potential for  disruption is perhaps still greatest in the world of finance; hence, the importance of crypto. The intrinsic qualities of a distributed ledger system that allows for speed and efficiency together with greater transparency and traceability is very appealing to banks.


Like JPMorgan Chase and Krungsri Bank, more traditional banks and the Crypto Ecosystem will continue to build their own blockchain platforms and native tokens until they realize that mass adoption will only be possible if a connection between the two occurs.


Hand in hand, with a legacy system and set of clear rules and regulations, they will be able to form a bond of trust because even the sworn enemies of government, big banks and monopolistic corporations, realize that a decentralized and democratized system like Bitcoin needs rules.