Is there still a need for banks in the blockchain world?

What happens during the year?

Last year, one after another, Lamborghini appeared at the New York Consensus Conference (when the participants were found to rent "show off the rich"), then the bitcoin price dropped from $20,000 to $3,000 (although the recent price has already been Pick up), this year's consensus meeting did not see the appearance of expensive sports cars such as Lamborghini.

Almost at the same time, experts and entrepreneurs mentioned the volatility of cryptocurrency and the development potential of the underlying technology (blockchain) at the consensus meeting.

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Eric Maskin, the Nobel laureate in economics, calls himself an encryption skeptic, he said.

“This is a way of storing value that is open to question. I am worried that we are using private funds to replace the legal currency of the government.”

Although bitcoin has been hit, the experiment of blockchain and cryptocurrency has gained more applications in institutions and companies, including Wall Street banks.

“When the market is in a downturn, we won’t be scared; we won’t be too excited when the market goes up,” said Paul Veradittakit, a partner at the blockchain investment fund Pantera Capital. “Now individual and institutional investors are hoarding. Digital currency, and what we want to do is provide staking and lending services for cryptocurrency assets earned by investors."

While this fanaticism may have subsided, economists, investors, credit lenders, and regulators are still gathering to discuss major trends and issues in digital currencies. The following is a discussion of the direction of the industry.
What is the bank waiting for?

Although some banks are optimistic about the blockchain, many banks are still holding a wait-and-see attitude. A key question is whether and when this will change.

Morgan Stanley's board of directors, network security services company BlueVoyant, capital market technology startup Capitolis executive chairman and co-founder Tom Glocer believes that most banks do not seem to want to join before the blockchain becomes mainstream This melee.

"At the moment, don't turn all your business into a blockchain because of efficiency, security, etc.," Glocer said. "It's best to do some controllable experiments."

Nadav Zafrir, CEO of Cyber8, a network security think-tank, said banks have to consider some risks. For example, the blockchain provides new opportunities for hackers to take advantage of. He believes that as the world gets closer, hackers are likely to overthrow longer dominoes.

Consumer attitudes also play a role here. For a bank to fully accept encryption, it must be fully trusted. But Glocer said that the extent to which most people trust the technology has not yet arrived.
Will the regulator join?

However, this is not just a question you don't want.

Many US banks face regulatory challenges that prevent them from developing blockchain projects.

For example, Lior Glass, head of blockchain at BNY Mellon, was blocked by the state government's requirement that banks hold paper copies of home loans when studying the blockchain use case for home loans.

Whether the application of the blockchain really improves the project and faces many problems.

Oleg Abdrashitov, director of the blockchain laboratory at PJSC Sberbank in Russia, said, “The blockchain technology has not yet caused disruption to banks.” “We will not see new business models until we are able to mark securities and properly mark the decree. Helping us reduce risk and increase inefficiency, but banking products are still traditional banking products."

It has been said that the solution will be the addition of regulators, especially a central bank, to create its own stability mechanism.

“If we have a nationally recognized stable currency and it is released through a smart contract,” Abdrashitov said, “this is the real subversion.”

Is the US regulatory sandbox useful?

The Financial Technology Sandbox is a popular tool in the global financial system that makes cryptocurrencies and blockchains well known to the market. However, in view of regulatory restrictions, there are problems with adopting such practices in the United States.

“The sandbox may be useful,” said US Securities and Exchange Commission (SEC) Commissioner Hester Peirce. “But you don’t want parents to build sandcastles inside. Usually you want kids to solve problems themselves. Once a regulator is staring You are limited by innovation."

She said that the United States needs the joint efforts of a variety of integrated agencies, such as the US Securities and Exchange Commission, the Federal Trade Commission, and the Commodity Futures Trading Commission, to determine which parts of the technology each regulator should be in charge of.

Peirce adds that if a company can discuss with the sandbox "give us some grace, we need to make it run, but it will be completely transparent to you", then this may be useful.

Republican Congressman Tom Emmer of Minnesota said that given the differences in encryption laws between the federal and state governments, Congress may need to introduce legislation, not to include it in the law, but to spread it to legislators.

“You have to show that our government is interested in creating a safe environment for these companies,” Emmer said. “Because everything is changing, your 'child' may escape to Europe.”

Is the bank still necessary in the blockchain world?

Perhaps the biggest controversy is that banks are important because of the emergence of cryptocurrencies.

"One reason why we like encryption for economists is that it brings you back to the first principle," said David Yermack, head of the finance department at New York University's Stern School of Business. "This lets you reconsider, the bank is not necessary."

However, some people think that although in theory, no bank's future is feasible, it is actually impossible. Eric Maskin said that if public currencies are replaced by private currencies like cryptocurrencies, it could interfere with our economic operations, such as the central bank's process of restricting the business cycle by adjusting the money supply.

“The idea that you can bypass the bank with cryptocurrencies sounds attractive, but the bank decides which startups are promising and which are not,” Maskin said. “If we break the banking system, we are at risk.”

Encryption does not always meet the historical economic standards of money, Yermack added, and pointed out that few merchants accept it as a payment, it can only process 7 transactions per second on a global scale, it can't be stored as value because it is So unstable. In addition, he believes that economists cannot manipulate the cryptocurrency market as easily as the current financial system. There is no way for the government to motivate competition, so monopoly will not occur.

Yermack said,

“If you follow the standards that economists have been using for centuries, that is, money is a storage value, a trading medium, and a unit of accountkeeping, then Bitcoin has never satisfactorily met these conditions.”

Who is responsible if there is a problem with the blockchain?

If the blockchain replaces the current financial system, developers may face the same fiduciary duties as banks.

This responsibility looks like a controversial industry debate. It has been said that it comes down to giving priority to “focus on responsibility” and “loyalty obligations”. “The first goal is not to cause harm, but the second goal is to maximize the benefits for the client.

“Do I want Zcash developers to focus on an agreement that will make Zcash holders rich? No,” said Van Van Valkenburgh, director of research at the Token Center and Zcash board member, describing the duty of care, “I hope Zcash developers Being able to develop the best software to protect financial privacy, but if this means that Zcash's price is falling, then let it go."

Responsibility for loyalty means that developers are accountable to stakeholders. However, there are many competing stakeholders in the blockchain, said Eladan developer Vlad Zamfir of the Ethereum Foundation, which includes token holders, miners and third parties.

Valkenburgh attributes responsibility to the loyalty or shareholder responsibilities of the 2008 financial crisis. The highest bidder for Lehman Brothers’ bankruptcy was the US government, when the US government was considering the cost of the economic collapse.

“The problem with institutional design is that if you impose responsibilities, it will cause everyone to stay away from participating in these activities and may stifle activities that are good for society,” he said.

But Angela Walch, a law professor at St. Mary's University School of Law, says loyalty obligations may still be important if developers can write things that others don't know.

"I would be surprised if people can accept that Bitcoin core developers are paying a certain amount of money from specific exchanges outside the system to drive specific strategies," Walch said. "If there is no obligation to be loyal, there is nothing to stop this." ("Planet Daily)

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