Have we started to see the capitulation of Bitcoin by the big banks in the last few weeks? Only yesterday the Bank of England openly stated “Bitcoin revolution could be the next internet” after performing their own research. The Bank of England has stated that bitcoin technologies “combined with mobile technology, may reshape the mechanisms for making secure payments” Whilst German Bank Fidor has started offering instant transactions for bitcoin with plans to setup internationally as of only a few days ago.

Greece’s new finance minister Yanis Varoufakis has previously stated “the technology of Bitcoin, if suitably adapted, can be employed profitably in the Eurozone as a weapon against deflation” the Ex Citigroup CEO Vikram Pandit has gone on record saying “Virtual currencies do have the promise of changing the world and personally invested in bitcoin business Coinbase ”. Whilst even the biggest player in the world of banking, the US Federal Reserve has taken bitcoin technology very seriously, issuing a white paper researching the potential for a federally issued bitcoin clone called Fedcoin. Fedcoin is theorized to act as a real-time settlement system which would facilitate the transfer of large international and inter-bank settlements whilst being pegged to the USD, meaning no price volatility.



This is a very important development for the world of bitcoin. If Banks were to implement a digital currency clone of bitcoin to reduce payment friction (cost and speed constraints) there would be drastic follow on effects throughout the entire financial industry.

As we have seen historically, companies with market share (operating as an oligopoly) do not innovate out of their own choice, only when disruptive technologies come along and challenge their status-quo. Bitcoin seems to be doing that right now.

The thing you have to realize is if a Central Bank issued their own digital currency it would provide savings, but at the cost of destroying their existing levels of control and overall profit margins. The only reason why they would want to change their system to be less profitable would be if they thought they had a serious competitor with the potential to destroy their entire market share. We have seen this before with the invention of P2P file-sharing service Napster and the failure of existing record companies to adapt.

If Fedcoin was created we would no longer have a segmented financial system. At current we have banks for storing money, remittance services for exchanging money, debit cards for consumer purchases, settlement systems for inter-bank transfers and a range of specialized financial services that are essential to the everyday tasks we need to complete. Fedcoin could provide a streamlining of all these services into one system.

The main problem is that you need all these different systems to conduct all the different aspects of finance. The current system lacks scalability in its service; digital currencies are the opposite. They provide payments to anyone, of any size, with more security and less costs. For the first time we have a system that allows for economic transfers without limits and the banks are now realizing this.

Much like how P2P technology completely changed the structure of the entertainment and copyright industries, P2P digital currency (yes like bitcoin) is doing the exact same thing towards the financial sector. Banks are taking bitcoin very seriously because they don’t have a choice, it’s either adapt or die.

Tweets by @ruperth

