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Blockchain Banking: where are the interferers?

A few days ago, KPMG published a report entitled: "The case for crypto and institutionalization". The document constitutes an explicit admission by one of the big names within traditional financial services that the capabilities of blockchain technology represent a natural solution for "Addressing problems in the global financial services ecosystem".

The authors of the report work on the assumption that traditional banks will embrace blockchain technology because its intrinsic qualities – immutability and transparency – are perfectly adapted to banking services; and, as such, will result in an inevitable move towards a much fairer and much more efficient banking system.

In practice, however, established banks are doing little to indicate that they are heading in this direction. So far, the banking system has benefited from protection from high barriers to entry, which in turn has curbed the kind of competition that could otherwise favor the type of upgrade for which the industry has long been lagging behind.

2008: Harbinger

While the world's major banks were abandoning the questionable practices that brought us the 2008 crisis, a clear message emerged from governments that had to intervene to save the global economy: we respect (and fear) too much to ask anything that can help us we avoid this kind of crisis in the future.

One of the failures of the 2008 crisis was, therefore, a clear indication for the banks themselves that, while many were too big to fail, they were also too big to reform.

In this context, it is now more unlikely than ever that established banks want to embrace the vast potential offered by distributed register technology, particularly when there is still too much profit to be made with muddy practices in relation to the loan, charges arbitrary applied to routine operations and mottled management of the scriptural monetary offer.

Blockchain Full Reserve Model

If the blockchain intends to destroy the banking system, the challenge will probably come from elsewhere. A number of projects emerged in an attempt to do so, including Baanx, BABB, Platio and PumaPay.

The latest in space is a Swiss project known as Monte Pelerin. Their proposal, however, is one that probably goes beyond the other competitors in the field. The project team plans to create a complete banking service using a total reserve model.

In other words, unlike traditional banks, this is a bank that does not intend to exploit its customers' deposits as a way to profit. Customers will retain full control over the liquidity of their account. So, how can such a banking model be profitable? The simple answer is: tokenization.

A blockchain platform can, first of all, offer P2P services. In other words, customers can lend money directly to companies or other customers. The bank, in other words, now acts simply as an intermediary through its smart contracts to ensure normal compliance, and is the customer of the platform that provides liquidity, if it gives its specific consent to do so.

"We expect to be the safest bank in the world for its customers' deposits" says Arnaud Salomon, CEO and founder of Mt Pelerin.

Offering other smart contracts protected by blockchain along with an API to host external products and services, the Mt Pelerin team believes they are proposing one of the most democratic banking models ever offered.

The banking sector is seen by some as the main candidate for the blockchain-wide industry breakdown, although most analysts do not foresee any observable change for at least the next decade.

In anticipation of a support license scheduled for the end of 2019, the Mt Pelerin project team may have just sent a signal that the traditional banking model will meet its blockie executioner much earlier than expected.

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