Bitcoin and the Copycat Bankers

Banks are eyeing Bitcoin’s technology more closely than ever, the community says, as the technology behind it becomes a source for innovation outside crypto-currency.

Bankers far and wide were quick to dismiss Bitcoin, with their views in recent press ranging from insults to casual musings on its long-term lack of prospects.

“It’s not a currency. I wouldn’t be surprised if it wasn’t around in the next 10-20 years,” veteran investor Warren Buffett told CNBC in March, with his business partner Charles Munger even likening it to “rat poison”.

Cherry-picking?

Nonetheless, this has not stopped the industry from examining the technology behind Bitcoin with a fine toothcomb behind the scenes.

“It’s safe to say that every bank is looking at what’s going on with Bitcoin and those types of technologies,” Steve Kenneally, a vice president of the American Bankers Association told Bloomberg. “Most of the larger banks are investigating it. The larger the banks, the further along they are.”

Bloomberg reports on how payments and accounts technology provider Fiserv Inc. “is examining Bitcoin’s use of encryption to ensure transfers are secure,” while FIS, which makes payment handling systems for banks, “is examining whether a public ledger like Bitcoin’s could help securely move funds on existing networks.”

Fiserv president Marc West is “especially interested” in the cryptographical aspects of Bitcoin, which could be incorporated into the company’s existing products.

As government regulators adopt an increasingly critical approach to Bitcoin, the idea that essential financial networks could adopt aspects of the technology in the future will be a bitter pill for many to swallow.

Nonetheless, news of new private-sector investment in Bitcoin appears every day, with Vaurum’s recent securing of US$4 million in seed funding being a particularly exciting example.

Wedbush Securities Managing Director Gil Luria, who envisages a concept of Bitcoin “successfully supplementing sovereign currencies” in the future, is considerably less averse to its mainstream adoption in some form than many.

“If banks were to transact with each other in Bitcoin, that would be a large opportunity,” he told Bloomberg.