Bitcoin and banks can work together, according to PrivatBank’s Alexander Vityaz, who sees card companies and cryptocurrency focusing on the technology aspect of transactions, while banks focus on brokerage.
Banks have had a tense relationship with cryptocurrency, from fighting Bitcoin to trying to patent blockchain technology for their own use.
However, Alexander Vityaz, Corezoid Founder and PrivatBank’s head of ecommerce, sees Bitcoin and card companies such as VISA and MasterCard working together with banks, taking on separate roles instead of competing for the same position.
Cointelegraph spoke with Alexander Vityaz about banking’s shifting relationship with both card providers and Bitcoin.
Bitcoin is not a competitor for VISA
Cointelegraph: Banks dealing directly with Bitcoin seems to be a rare occurrence. Is that an accurate sentiment?
Alexander Vityaz: Yes, that is correct - because of compliance, KYC, AML. PrivatBank doesn't work with Bitcoin directly. We use blockchain technology (Bitcoin digital signature - public and private keys) to sign financial documents, transactions, and even for encrypting traffic in mobile app.
CT: What prompted PrivatBank to be different in that regard?
AV: What prompted us? We wanted to spearhead this movement. Curiosity prompted us. We always wanted to be #1. For example, the first p2p card to card transaction we did in 2003 (!) in partnership with Visa.
CT: Many in the cryptocurrency community think that Bitcoin and blockchain technology will be the end of banks as we know them today. Do you share that sentiment?
AV: In brief, we don't share this sentiment. These two technologies will coexist. Banks will become credit brokers, and Visa will deeply learn how to use Bitcoin and blockchain.
As I’ve said before, Bitcoin is not a competitor for VISA, as VISA now isn’t the same as VISA back when PayPal emerged. It will research, integrate, and keep its finger on the pulse. In fact, it will most likely be a kind of co-evolution rather than confrontation.”
Role of banks will diminish
CT: The use of cryptocurrency allows many of the unbanked to receive the same benefits as using a bank, without the cost or difficult setup. Do you think that would reduce the role of banking for the everyday citizen? Or would it have no serious effect? Or, will the role of traditional banks diminish, but for a different reason?
AV: We will not have a situation: “either Bitcoin or banking.” It'll be “both.” The role of banks as technology companies will diminish, they will concentrate on money brokerage - as they were doing this hundreds years ago.
Bitcoin as it is today is rather hard for common citizens to use. Plastic card is much more simple product. What will really happen is that banking functions (from the point of view of technology) will gravitate away from banks towards global payment systems, such as Visa, MasterCard and towards Bitcoin technology.
As I’ve said: “Theoretically, defragmentation of a super-fragmented system (there are 30,000 banks in the world) is possible with two systems only, vertical or horizontal, namely payment systems or Bitcoin respectively.”
Being decentralized Bitcoin irritates a lot of banks
CT: Do you see any banks unwilling to accept this new, more limited role in the world financial system?
AV: All the banks are not willing to accept this. But it's temporary, because they don't understand what's going on. As soon as they realize that they don't have to become IT-companies, banks will accept their new role.
Bitcoin irritates a lot of banks, because it's decentralized. They don't know how to manage it, because banks are not IT-companies, and can't become IT-companies.
Visa and MasterCard have good chances to become IT-companies, because they were born as global companies. Banks will get tools for working with Bitcoin from Visa, MasterCard.
Classic money will adapt features from cryptocurrencies
CT: Now, central banks, I'm sure, may take a different view, at least in regards to Bitcoin, since it provides a currency they cannot control or inflate. Do you see many banks following this skepticism towards a currency that is not directly government-controlled?
AV: Banks want to get from Visa and MasterCard products of the same level of readiness as plastic cards. They don’t want to get APIs only. Banks do not individually re-invent plastic cards. They sell absolutely standard Visa and MasterCard cards.
As a set of ready-made processes you can imagine not only Bitcoin-enabled tools, but also P2P money transfer, Internet banking, e-commerce tools. Internet banks need to become the same standard product, such as a Visa or MasterCard card. Bitcoin doesn't replace anything. It's a complementary currency.
From my interview in Forklog: “I think cryptocurrencies may supersede minor currencies, or even become a basis for the financial system in countries like North Korea. It’s the only chance to bypass the banking system with its obstacles and reach the world for such totally enclosed nations.
As for ‘mature’ currencies, it will be more a case of hybridization rather than superseding. Classic money will adapt useful features from cryptocurrencies and use Bitcoin’s ecosystem. Transfer of cash issuance onto altchain is quite likely for some countries.”