Reasons why banks should invest in Bitcoin and its underlying technology

Various financial institutions are hedging their bets and taking Bitcoin seriously. DR

Satoshi Nakamoto, the anonymous creator of Bitcoin, published a white paper on his research in 2009, bringing together existing concepts that could facilitate a fair online currency. This currency is important because it functions as a decentralized public ledger, allowing assets to be tracked in a proven and relative way around the world. Like banks investing in bitcoin, you can also earn returns by trading bitcoin on

No one can change the transaction ledger without everyone noticing, so it’s a fair way to exchange goods and services. Furthermore, the basis of these rules is consensus, so all users hold the system accountable. This feature guarantees the integrity of the system and makes it possible to improve it if these improvements benefit the general public. We’ve seen many of these improvements so far, and the developers continue to add new and exciting things to Bitcoin every few weeks. It is a dynamic code base.

Another intriguing aspect of Bitcoin is how all network transactions are recorded on the blockchain, allowing us to see the history of all transactions in real time. We can track their movements around the world, which is useful for audits. However, individuals can also use it to track the history of a specific token or asset. For example, if one were tokenizing cotton, one could see how particular units of cotton might move through a local supply chain and eventually become a finished product. It’s a benefit to many different interest groups, for a variety of reasons. And it’s something that some people have wanted for a long time.

Why have some banks started investing in Bitcoin?

Various financial institutions are hedging their bets and taking Bitcoin seriously. They want to participate in its expansion. Blockchain, ledger technology and digital currencies will play a vital role in these institutional banks. Investing in some of the early Bitcoin companies gives them insight into the evolution of the industry and access to developed technology. I am convinced that they will integrate this technology into their current infrastructure.

If financial institutions have started investing in Bitcoin, why stay away from this powerful technology?

How Banks Can Integrate Bitcoin

Banks could use blockchain or a public or semi-public ledger to complement current interbank settlement networks such as Swift or ACH. Banks would reduce prices and compliance risks by implementing blockchain. Also, as it is a rules-based and protocol-based technology, the risk of human error is much lower.

Banks could also use Bitcoin in original ways. They could tokenize a loan and then sell it on the market in a flexible and traceable way. Or, let’s say they want to offer products and services in markets where they don’t yet exist. Suppose a New York-based bank wants to provide services to a Southeast Asian community. This would not be easy to achieve today. Yet, with a digital currency, the bank could potentially reach this new market without having to convert the fiat currency of this local community into the bank’s local currency.

Also, there is security. Bitcoin is at the cutting edge of cryptographic technology. By integrating these new concepts, banks would incorporate advanced security features such as public key encryption and private key message signing. As a result, consumer protections would be stronger.

Would you advise banks to invest in Bitcoin?

Many experts would, especially the big banks. Many have Bitcoin working groups that are actively exploring the potential of this technology. What many experts would advise banks is to take it seriously. We’ve seen what happened to the recording and publishing industries, and the banking sector can’t be far behind. Banks would be well advised to incorporate some of these technological advancements into their business models. We have success stories like iTunes, Pandora, the New York Times and Bloomberg – they have embraced new technologies rather than fighting them.


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