Okay, so the headlines are buzzing. Banks are "embracing" blockchain. Santander, HSBC, JPMorgan Chase, the whole gang. They’re looking at cross-border payments through Fnality. They’re tackling trade finance at the same time with Project Agora and syndicated loans with Versana. Are we really nearing such a financial revolution?
I’m not saying blockchain is bunk. It has potential. But let's not mistake experimentation for transformation. These banks aren’t magically turning into crypto startups overnight. They're cautiously dipping their toes in the water, and there are some very good reasons why we shouldn't expect a tidal wave of change anytime soon.
Think about it. Banks are, at their core, risk-averse institutions. They thrive on predictability, regulation, and control. Blockchain, in its purest, decentralized form, threatens all of that. The transparency and immutability afforded to us by blockchain should be viewed as powerful features. These very qualities make them difficult for institutions accustomed to upholding rigid lines of privacy.
Banks Love Control, Not Disruption
Consider this "unexpected connection": It's like a seasoned chess grandmaster suddenly being asked to play Go. I mean, sure, they’re both strategy games, but the principles at work are completely unrelated. Clearly banks are masters of the old school financial chess match. Blockchain requires a completely different mindset.
Recall the internet’s wild west days? No guidelines, no regulatory framework, just un-friggin’-hindered innovation of the private sector. That's not how the financial world works. Every customer interaction, every sale, every product offering, every service, you name it — it’s micromanaged, regulated and frequently, tied up in a bureaucratic knot.
Regulatory Maze Blocks the Path
Fnality’s Utility Settlement Coins, for instance, have a huge hill to climb for regulatory approval. Getting central banks to adopt digital successors to their fiat currencies, fully backed by central bank reserves? That's a monumental task. Even if they win in one jurisdiction, they will not have a simple ride. They’ll encounter a confusing patchwork of various regulations globally. It’s not just about the technology. It includes high-stake international diplomacy and complex legal battles that overshadow the scope of the disputes of Brexit. The concern over these regulatory unknowns is just as real and felt throughout the industry.
Payments giant JPMorgan’s Liink network claims more than 400 participating institutions, a figure that certainly looks good on paper. How interoperable are these various, incompatible blockchain systems really? The financial world is a complex web of interconnected systems, and if these blockchain initiatives can't seamlessly integrate with existing infrastructure, they're just creating new silos within the old system.
Interoperability Nightmare Looms Large
Think of it like this: It's like everyone suddenly deciding to build their own version of the internet, but none of them can connect to each other. What's the point? One of the overarching goals of Canton Network is to have that unified infrastructure. It is up against the massive task of actually getting all these competing systems to work together.
The stark reality is that blockchain, as currently implemented, just isn’t up to the task of processing the transaction volumes of the global financial system. Bitcoin is only capable of processing about seven transactions a second. Visa can handle tens of thousands. Even these permissioned blockchains backed by banks will struggle to scale to meet the demands of a truly global, interconnected financial system.
Scalability Still a Serious Question
This is not merely a technical challenge — it is an economic one. The greater the number of transactions a blockchain network handles, the more energy it uses and the more costly it is to maintain. Until these very serious scalability issues are fixed, blockchain will be a niche technology—not a solution that’s gone mainstream.
Let's be honest here. Like the enterprise use case, banks are gravitating towards blockchain’s promise simply because they believe there’s a way to increase efficiency and save costs. What they do want is not to be disrupted out of existence. They are not seeking to build a beautiful, decentralized, trustless financial system that makes their operations irrelevant. Instead of using blockchain to fundamentally change the existing system, they’re just trying to use this new tech to improve the current model… by a few percentage points.
True Disruption? Banks Don't Want It
Bank of America has more than 80 patents related to blockchain technology. That’s not an indication of revolutionary zeal. It’s a signal of defense of their turf, a staking of their claim in a new promising technology. It's about control.
So, are banks betting on blockchain? Yes, they are. But is it a revolution? Not yet. It’s less a wild experiment, a leap of faith, a shot in the dark than it appears on the surface. So don’t expect to see the world’s financial system turned on its head anytime soon. The wheels of change in banking – as anywhere – turn slowly, deliberately, and with a healthy dose of skepticism. I think the average consumer with medium to high spend will see any radical shifts in their everyday banking experience. But it’s difficult to identify transformational changes coming down the pipeline. The genuine revolution, if it’s to come at all, is far down the road.
The author is a financial analyst based in Tokyo and offers independent opinions. This is informational, not financial advice.
Disclaimer: The author is a financial analyst based in Tokyo and offers independent opinions. This article is for informational purposes and should not be considered financial advice.
