On October 30, Bank of America (BofA) added yet another cryptocurrency-related patent to its collection of more than 50 applications filed within the same field.
The second-largest bank in the US has been leading in the informal blockchain patent race, sidestepping such players as IBM and Alibaba. However, that does not mean that BofA is being bullish — the company has been publicly criticizing cryptocurrencies, relying on patents mostly to appear progressive in the fintech community.
Brief history of BofA’s filing crypto-related patents
The bank filed its first blockchain-related patent back in March 2014, and it was published by the U.S. Patent and Trademark Office (USPTO) — the agency that awards copyrights on inventions in the country — in September 2015. Dubbed “Wire Transfers Using Cryptocurrency,” it didn’t mention the word “blockchain” per se, but described a system where funds are sent between accounts using cryptocurrencies’ underlying technology.
It appeared to be the first crypto-related application from a major retail bank in the U.S., and possibly worldwide. It does not seem particularly surprising that BofA was the first among its kind to claim such a patent, given that it was also one of the first banks to initiate coverage of Bitcoin in 2013, when it published a report compiled by strategists David Woo, Ian Gordon and Vadim Iaralov. Entitled “Bitcoin: a first assessment,” the paper argued:
“Bitcoin could become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money-transfer providers. As a medium of exchange, Bitcoin has clear potential for growth.”
In September 2015, the same month BofA was awarded with a crypto-related patent, the financial institution joined R3, a consortium of over 200 members, including various banks, trade associations, and fintech companies, who work towards developing blockchain solutions.
Thus, starting with the “Wire Transfers Using Cryptocurrency” entry, blockchain-oriented patents have been piling up for BofA. In December 2015, the USPTO published ten new entries filed by the bank in July 2014, all of which mentioned the word “cryptocurrency” in the title, and referred to various systems, such as “Offline Vault Storage System,” “Online Vault Storage System,” etc.
The following month, in January 2016, the bank revealed it was preparing to send 20 more blockchain-oriented patent applications to the USPTO office. In an interview with CNBC, Chief operations and technology officer at BofA, Catherine Bessant said:
“As a technologist, the technology is fascinating. We have tried to stay on the forefront. I think we have somewhere around 15 patents, most people would be surprised at Bank of America with patents in the blockchain or cryptocurrency space.”
Eventually, BofA secured the first place in an unofficial patent race — by June 2018, the institution held around 45 live patents (meaning that they are active and have not expired), the largest amount among all companies, according to research from Marc Kaufman, an attorney co-chairing the Blockchain Intellectual Property Council at the U.S. Chamber of Digital Commerce. The U.S. bank bypassed such technology-oriented players as IBM and Alibaba, not to mention its direct competitors — Royal Bank of Canada (RBoC) was the second among all banks, holding only eight patents.
‘Important to reserve our spot’: BofA’s complicated relationship with crypto-technology
BofA’s efforts in the blockchain domain do not necessarily mean that the company will develop actual products. Nor does it mean that the company is being bullish in regards to all things crypto. Quite oppositely, the U.S. bank has clearly prioritized having a registered technology over actually using it.
In 2016, Catherine Bessant told CNBC that having blockchain-related patents is “very important [...] to reserve our spot even before we know what the commercial application might be.” On the CB Insights, Future of Fintech event, in New York in June of this year, she reterieted that comment:
“We’ve got under 50 patents in the blockchain/distributed ledger space [...] While we’ve not found large-scale opportunities, we want to be ahead of it, we want to be prepared.”
Notably, those endeavors didn’t prevent the 113-year-old bank from calling Bitcoin “troubling” and uplifting its decision to ban customers from purchasing crypto with their credit cards. Moreover, in its annual report published in February, BofA admitted that cryptocurrencies are a threat to its business model, stating:
“Clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies.”
In August 2018, Michael Wuehler, a blockchain specialist at ConsenSys, who previously worked at BofA for more than 11 years, as per his LinkedIn profile, took to Twitter to announce that while his name is listed on “8 of 50” BofA blockchain patents as an inventor, they are “meaningless” from his perspective. Wuehler argued that the patents were filed to attract press coverage and make the bank appear progressive in the fintech space.
Indeed, having a fintech patent does not necessarily imply it will be used in the future. A blockchain patent, like any other patent, is a set of exclusive rights issued by an official authority — a sovereign state or intergovernmental organization — that an inventor or assignee gets in exchange for revealing their invention to the public.
As Bloomberg explains, business-wise blockchain patents “are an essential ingredient for companies looking to reshape the financial services industry or spawn profitable cryptocurrency-related businesses.” Essentially, patents help companies attract investment, protect property rights and collect monopoly profits from other companies using their inventions — and that could be the case with BofA.
BofA’s latest patent filings: from private keys storage to cryptocurrency exchange system
Here are some details of BofA’s blockchain efforts published by the USPTO within the past year. That should provide a clearer picture of how the bank plans on using the technology, at least hypothetically:
BofA’s most recent cryptocurrency-related patent award, which was confirmed on October 30, references storage methods for private keys.
Specifically, the filing reads, current opportunities for ensuring private keys remain untampered with are insufficient.
“While many […] devices may provide for acquiring evidence of a security breach (i.e., physical or non-physical tampering with the device and/or the data), such devices do not provide for real-time response to such breaches, such that misappropriation of private cryptography keys is prevented.
“Therefore, a need exists for a secure means for storing private cryptography keys. The desired storage means should reduce the risk of misappropriation of keys due to the keys being stored internally within a computing node that is frequently or, in some instances, continuously accessible via a public communication network, such as the Internet.”
Multiple digital signatures
On September 18, the USPTO shared a BofA patent for adapting multiple digital signatures in a distributed network.
The patent proposes a system for managing data communication from internet-connected devices. The document underlines that “the invention provides automated determination of which devices are communicating to which third-party entities and, in some embodiments, the type of data being communicated to such third-party entities.”
BofA’s proposed system addresses devices within an Internet of Things (IoT) environment, describing how each of devices within the network will communicate data with each other “on an ongoing basis,” while the system would allow a user to “select to prohibit (i.e., block) or limit which data is communicated to which third-party entities.”
In July, the USPTO published the bank’s patent for a blockchain-based system allowing the external validation of data.
Thus, BofA’s filing proposes using blockchain for tracking resource information and confirming resource transfers, arguing that “a need currently exists for providing a more accurate indication of a user's financial standing by allowing external validation of data in a process data network.”
The patent describes how the system would record information on the blockchain based on “aggregated information associated with past transfer of resources executed by an entity,” and would update the information on the blockchain with each new transaction activity.
In April, the bank’s application for a patent on a blockchain-based storage system with automated data authentication was unveiled. The document was originally filed in October 2016.
In the document, the BofA author describes a blockchain-powered system for authenticating data and providing secured access of said data to service providers. The patent addresses the problem of data transferring and tracking, which it says can be resolved by means of cryptographic keys in a private blockchain:
“Embodiments of the invention utilize a private blockchain to store various types of records to be conveyed to the service providers. In this way, the individual or entity may securely store on the blockchain all records relevant to service providers, then provide the service providers with secured access to said records such that the providers may access only the specific records for which they are authorized, e.g. a healthcare provider may access only the healthcare records on the blockchain.”
The author also outlines disadvantages of conventional methods of records sharing and keeping, such as e-mail attachments, claiming they are sensitive to tampering as “they lack a built-in mechanism for authenticating records.” A blockchain-based system, in turn, would represent an efficient, secure and reliable way to store records and only provide access to authorized parties, the patent concludes.
Cryptocurrency exchange system
In December 2017, BofA was awarded with a patent that outlines a digital currency exchange system. As per the document, the system will allow the conversion of one digital currency into another automatically, with the exchange rate to be determined based on external data feeds.
Under the patent application, the proposed system would gather data from external information sources on the current virtual currency exchange rates and utilize the data to calculate its own optimal rate. Specifically, the filing reads:
"Enterprises may handle a large number of financial transactions on a daily basis. As technology advances, financial transactions involving cryptocurrency have become more common. For some enterprises, it may be desirable to exchange currencies and cryptocurrencies."