Recently, the Institute of International Finance held its annual membership meeting in Washington wherein banking elite from all over the world convened to discuss many topics that included a discussion on the potential threat to traditional banking from Bitcoin and other crypto-currencies that are fast becoming popular.
The participants also discussed what should banking “do” about a Bitcoin threat and what can they do about it? The leading names included Jamie Dimon, the CEO of JP Morgan Chase. He said that Bitcoin developers are going to try to eat their lunch, and that’s fine that’s called competition, and the traditional banking will be competing.
Dimon further elaborated his views on Bitcoin and said that Bitcoin is a terrible store of value yet last year J.P. Morgan Chase has made a patent application for their own anonymous digital payment system. The participants also discussed about the Bitcoin regulations that are appearing up in the US and are part of a great debate.
One such regulation that was proposed by New York’s Ben Lawsky is the infamous “BitLicense”. A lot of people opposing Bitcoin feel that if Bitcoin cannot be beaten, making it illegal, or useless, through regulation will serve the purpose. However, it looks regulation is the last thing that the attendees of the event suggested.
Regulation is not the Way out Say the Bankers
Anshu Jain, co-CEO of Deutsche Bank says that regulation should be avoided as it is not a way banking can attract innovation or adaptation. He questions and says that why has disruption not happened in finance? There’s a very straightforward reason: Regulation. However, according to him if Bitcoin wants to take retail deposits, they will have to change their culture.
Jain who belongs to India noted that in every core division the traditional banking companies are working on innovation. However, according to him typically it starts with a client need being met in an unconventional fashion and it is arguable that a process where clients take the lead has more to do with customer service and incremental technical advances than the kind of genuine, lasting innovation that has the power to shift market structures.
On the other hand Bitcoin supporters, not surprisingly, are disparaging of the banks’ ability to innovate, especially given the burdens imposed by post-crisis regulation. Barry Silbert, founder and CEO of SecondMarket, a Bitcoin exchange says that two years ago he would have said the biggest obstacle to growth of Bitcoin was regulation, now he thinks it is the biggest opportunity.
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