FinTech’s Not Afraid Of The Big Bad Blockchain

Last week, International Monetary Fund managing director Christine Lagarde spoke at a banking conference in New York and told financial players throughout the globe not to be afraid of the blockchain.

“Many of you in the industry are actually worried that those technologies are going to massively disrupt the current industry,” she said, adding that those concerned should “pause for a second” and be open to the potential for the blockchain to make a positive change in the market.

If the world’s banks are afraid of the blockchain, they aren’t showing it.

[bctt tweet=”If the world’s banks are afraid of the blockchain, they aren’t showing it.”]

This past month, blockchain innovators and banks became closer than ever, and PYMNTS takes a look at what all went down.

Investments, Partnerships And Buyouts

Barclays inked two partnerships with blockchain startups, both of which graduated from the bank’s accelerator program. One startup, Wave, wants to facilitate trade finance with the blockchain and take advantage of the ledger technology’s ability to ease friction in cross-border transactions. The other, Chainalysis, provides security and cybercrime protection for businesses using blockchain tools.

Blockchain startup Blockstack found a buyer late last month when Digital Asset announced it will acquire the company for an undisclosed sum. Blockstack offers a blockchain-as-a-service tool to provide FinServ players with a way to wield the technology and develop their own applications.

Digital Currency Group snagged its own financial support from a slew of big-name backers like Bain Capital, MasterCard and New York Life last month as an undisclosed sum went to the company that wants to aggregate support for the blockchain ecosystem.

Santander Bank’s venture capital fund Santander InnoVentures will put up $100 million to back blockchain startups, reports said last week.

Finally, Microsoft announced its support for a blockchain-like technology, Ethereum, when it struck a partnership with Consensys. Consensys will allow businesses using Microsoft Azure to develop applications that use Ethereum technology for an array of corporate financial applications, like cross-border payments or corporate accounting – a move that banks on Etherum’s ability to handle any digital product, not just currency.

Blockchain Visions

For the businesses rolling out blockchain services on the market, it’s not all about the currency; innovators have some other ideas for how to use the blockchain.

Last month, NASDAQ rolled out Linq, a technology using the blockchain to track share exchanges. Meanwhile, Chroma Fund sounded off on its vision for the technology: using blockchain to facilitate crowdfunding for startups, in which the blockchain is used to transfer authentic, digital share certificates to an investor.

Meanwhile, AlphaPoint rolled out an actual tool last month for financial institutions to take advantage of the blockchain with the release of StreamCore, a way for banks to interact with data stored on the blockchain and use that information to create new services.

Safeguarding Against Crime

The IMF’s Lagarde said in her recent statements that should banks want to stay protected amid the disruption caused by blockchain technology, they should take ownership of its safety.

“The banking industry has quite a few good days ahead of it as long as it takes ownership of those issues of capital and culture in order to actually restore that trust without which you see no trade, no transaction, no business can take place,” she said of the security concerns related to the blockchain.

But blockchain players are taking ownership of the technology’s security, too.

Last month, a group of blockchain players forged the Blockchain Alliance, made up of members of the Digital Chamber of Commerce as well as Coin Center. The group not only wants to combat the seedy reputation of blockchain tech, but also to create relationships with law enforcement to “help reduce anxiety about this transformative technology,” the group said.

Future Outlook

Lagarde may be assuring banks that it’s OK to embrace blockchain tech, but according to the latest analysis from Magister Advisors, the deluge of financial backing will continue to flow. Researchers found that blockchain startups are set to see $1 billion worth of investment in the next two years, and that multiple FIs surveyed by researchers are investing in multiple blockchain projects at once – in some cases, up to 20 ventures.

“Blockchain is, without question, the most significant advancement in enterprise IT in a decade, on a par with Big Data and machine learning,” said Magister Partner and Research Lead Jeremy Millar. “What Java is to the Internet, blockchain is to financial services.”

Researchers may have a bright outlook for the value of the blockchain in the next few years, but we at PYMNTS will continue to take it month-by-month to track this technology’s path.