The crypto banking revolution is on hold, ANZ

Bitcoin is back in the game, having more than doubled in price this year. But don’t bet on it overhauling the banking establishment. History tells us revolutions in the financial system are amalgamated into the mainstream as soon as they reach a scale to have systemic impacts.

That’s the view of Andrew Cornell, Managing Editor of Australia and New Zealand Banking Group’s (ANZ) bluenotes portal. “It’s the Catch-22: regulators and policy makers let revolutionaries prosper until the revolution gains enough followers at which time it is forced into the existing state,” he says in a new blog post.

But that doesn’t mean cryptocurrencies will disappear. The architecture has some major attractions, Cornell argues, including the potential to limit fraud with the payment (as opposed to scams which occur between the participants, not in the transfer).

What is salient, however, is the absence of Bitcoin et al from most of the myriad existential discussions of the future of banking. For example, the FSB’s new report on FinTech and market structure in financial services: “Market developments and potential financial stability implications” mentions “crypto” only once – and that in a footnote.

A new report from consultants Celent, “Innovation in Banking and Payments 2019”, runs through the key trends in the field while looking at a model bank of the future. Cryptocurrencies don’t feature.

“Innovation will focus on open banking, customer experience, mobile and digital channels, the cloud and artificial intelligence. Of course cryptocurrencies might feature if, for example, they enhance customer experience and become more efficient in digital banking,” Cornell says.

“But it is difficult to contemplate that happening without crypto gaining far-wider legitimacy with regulators. The always entertaining CB Insights will no doubt have a perspective on crypto but in the meantime its reminder on getting too excited is apposite: “Hi there, for all you public company executives, please note that artificial intelligence mentions have overtaken mentions of blockchain on quarterly earnings calls. Please adjust your corporate strategy accordingly.”