Blockchain – the technology that underpins the cryptocurrency bitcoin – is unlikely to kill banks despite warnings from top industry executives, the chair of a bitcoin non-profit organization told CNBC on Monday.
Last week, Andrey Sharov, a vice president at Russia’s Sberbank, said banks would disappear by 2026 due to the rising use of blockchain technology.
“In 10 years, there will be no banks, I’m afraid,” according to a translation of Sharov’s comments by the Coinfox bitcoin news website.
But Brock Pierce, the chairman of the Bitcoin Foundation, said that while the adoption of blockchain will hit parts of a bank, it will ultimately create opportunity.
“There are certain aspects of their business that are going to be negatively impacted, but there are also going to be other business units that are going to be positively impacted and new business units that get created that might not even exist today,” Pierce told CNBC in an interview on Monday.
“And the parts of the industry that are being most negatively impacted are the ones where the bank is not providing much in the way of value, where they are being a toll taker but not really a value creator.”
Blockchain is the technology that underlies the cryptocurrency bitcoin. It works like a huge, decentralized ledger for bitcoin which records every transaction and stores this information on a global network so it cannot be tampered with. Banks feel blockchain technology can be utilized in areas from remittances to securities exchanges to bring about efficiency.
The Bitcoin Foundation positions itself as an organization that is helping to advance the use of the cryptocurrency “through advocacy, education and support of adoption and core development”, according to its website. While there is no centralized authority for bitcoin, the organization is trying to create common standards for its use.
Pierce has a varied history. He was a child film star who appeared in Disney’s “The Mighty Ducks” film in the early 1990s. He has previously run internet companies and is a partner in Blockchain Capital, a venture capital firm that invests in companies in the space.
A number of major financial institutions have been speaking publically about blockchain and touting its potential. A firm called R3 has brought together a group of the world’s biggest banks including JPMorgan and Citigroup and is dedicated to researching and delivering new financial technology. Another company called Digital Asset Holdings, founded by an ex-top JPMorgan executive, partnered with JPMorgan earlier this year to explore blockchain technology.
Speaking at the Money 2020 conference in Copenhagen last week, Digital Asset Holdings chief executive Blythe Masters, said blockchain technology will be “deployed in a commercial setting in less than a couple of years,” but widespread adoption would take longer, a point Pierce echoed.
“I think banks are going to take a while to integrate this … it’s going to take them years of testing before they start to commercialize aspects of the technology … it’s more likely to have an impact in other industries in the short term which are less-regulated and where the stakes are lower,” Pierce told CNBC.
Pierce also explained that there would be “dozens of different versions of blockchains” deployed for different use cases.
Bitcoin ‘major PR problem’
The Bitcoin Foundation has had a checkered history. In December, Pierce declared in meeting minutes that the organization was “close to running out of money.”
And bitcoin itself has had a bad reputation. The cryptocurrency is often linked to allowing people to purchase illegal items anonymously, while one of the world’s largest bitcoin exchanges, Mt. Gox, collapsed in 2014.
While not referring to these specific incidents, Pierce did admit that bitcoin’s reputation has suffered some bad publicity, and why the banks are focusing on the underlying technology of blockchain.
“Bitcoin’s got a major PR (public relations) problem and that’s why you hear major banks saying bitcoin bad, blockchain good,” Pierce said.
“Emerging technologies and the earliest adopters often produce these types of messages. And bitcoin as the pioneer takes the arrows in the back…which is probably not warranted.”