Australia’s Top Banks Move to Blockchain, as Crypto Threatens a Parallel Economy
July 4th, 2019
Australia’s three largest banks have agreed to offer and process banking guarantees digitally on the blockchain. Reportedly, they have entered into a partnership with IBM and Scentre Group to start testing the new technology to digitize bank guarantees.
The three banks which formed the partnership are, Australia and New Zealand Banking Group, Westpac Banking Corp, Commonwealth Bank of Australia. Didier Van Not, general manager corporate and institutional banking at Westpac told the media,
“While the pilot is focussed on retail property leasing, this technology has the potential to benefit many sectors and reduce the risk of fraud across billions of dollars guaranteed by the banks,”
Inclusion of Blockchain Technology in the Banking Sector
The transparency and independence that cryptocurrency provides are luring for an individual customer. However, technology can turn out to be disruptive for the current banking system established in the world. Hence, it has become imperative for banks to include blockchain technology in their processes as well.
Recently, the Izabella Kaminska, a financial journalist noted that the banks have a tremendous advantage when it comes to liquidity and handling of funds. However, FinTech companies like Tether and now Facebook’s Libra challenges the existing system in place of a transparent one.
Nevertheless, shadow banking concerns and using customer deposit to earn interest raises doubts regarding the actual reserve. Hence, similar to China where Alipay and Tencent are required to back their customer deposits by 100%, the new parallel economy with stablecoins also seems to be moving towards the same structure.
Moreover, the banks have started to retaliate by the inclusion of the technology in their space. As Reported on Coingape earlier, the CEO of Goldman Sachs, David M. Solomon also noted that ‘assume all institutions are looking towards blockchain.
IBM’s world wire program is piloting to include the banking services now managed by individual servers and control, to be automated on the ‘permissioned’ blockchain. The issuance of a loan and other financial securities can be performed using smart contracts which will reduce fraud and corruption in the system significantly.