Representatives from major European banks got together at the European Blockchain Convention in Barcelona this week.
The key topic of debate was the utility of blockchain technology within their institutions.
Santander bank bullish on blockchain
Spain’s Santander bank confirmed on Monday that it is already preparing financial products based on blockchain technology. The institution has conducted various pilot tests and will continue to test the utility of blockchain.
While the nature of the bank’s commercial strategy remains confidential, Santander’s head of blockchain María Concepción de Monteverde claimed it would probably take another three years before blockchain technology makes any great progress. She said:
“Banco Santander conducted a real pilot test with the issuance of a bond for 20 million euros at the end of the year… It was a real pilot test [using the Ethereum blockchain], with a real transaction with the bank as seller and buyer. The natural step for the future will be to offer a similar product aimed at the financial market.”
Realistic expectations about blockchain
Representatives from several major European banks were also in attendance. Among them were ING, BBVA, the Bank of England, and the European Central Bank (ECB).
According to CriptoNoticias, developing and establishing business models based on Distributed Ledger Technology (DLT) or blockchain are fields that European banks are only just beginning to understand. They are not yet prepared to offer large-scale business services.
During the convention, which took place from January 20 to 21, key banking executives discussed the usability of decentralised networks. While none were opposed to their application nor blind to blockchain’s potential, all were in agreement that more time is needed.
There are still many hurdles that banks must overcome before implementing blockchain into their existing systems. These include regulatory aspects, cybersecurity, development costs, and interoperability with existing systems.
Head of blockchain at Netherlands’ ING Bank Scott King considered the technology to be physically ready. However, he said that banks would need time to implement it due to all the aforementioned concerns.
What the central banks are saying
During the event, representatives from European central banks also gave their points of view on blockchain technology.
Leader of the research team at the Bank of England Michael Kumhof highlighted the importance of cryptocurrencies – and stressed the transition process that banks must go through to handle blockchain. He said:
“What is most concerning at present is the transition to blockchain technology and cryptocurrencies […] central banks need tools to control the evolution of assets, since as always, the stability of the financial system is the main concern of central banks.”
In terms of business proposals, Dirk Bullmann, a member of the innovation team at the ECB, indicated that these should be submitted by private institutions. Central banks, he said, should then be responsible for regulating and supervising the ideas implemented.
He believes that blockchain technology is very much in its innovation stage and that the final push for mass adoption must come from commercial banks.
In terms of technology development, Carlos Arena from R3 (a blockchain start-up that works with BBVA) said that one of the main advantages of decentralised platforms is their lower cost per transaction. This will lead to the emergence of new platforms and even new markets.
Blockchain development in Spain
— Dolors Núñez (@NunezDolors) January 21, 2020
These companies currently employ around 400 people and have a collective business turnover of 9.5m euros. Among the sectors with the most blockchain projects are food, logistics, public administration, commerce, and health care.
In December 2019, five Spanish banks agreed to test payments with a private blockchain. They announced that they would enter into joint projects related to blockchain, regulation, proof of concept, and user experience. Santander, Bankia, BBVA, CaixaBank, and the payment management company Iberpay were involved.
In between the advances of blockchain and the interest of central banks to regulate cryptocurrencies, an investigation by two Spanish universities determined that a hypothetical plan to replace cash with cryptocurrencies would take longer in Spain as most salaries are still paid in cash.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.