Bank of America has been notoriously bearish on blockchain, suggesting that it doesn’t scale well for large client bases.
Even though the institution holds more patents related to blockchain than any other bank, chief operations and technology officer Cathy Bessant has repeatedly expressed reservations about the technology. While she says she’s open-minded, Bessant is waiting for key evidence before going all-in.
“I haven’t seen one [use case] that even scales beyond an individual or a small set of transactions,” Bessant said. “All of the big tech companies will come and say ‘blockchain, blockchain, blockchain.’ I say, ‘Show me the use case. You bring me the use case and I’ll try it’.”
It seems like Ripple has done just that. According to a seminar presentation at the IMF last year, the combination cryptocurrency and transaction platform has identified Bank of America as a customer.
Ripple may have won Bessant’s approval exactly because it doesn’t use traditional blockchain technology. Instead, it relies on a proprietary system called Ripple protocol consensus algorithm to verify and track transactions. There’s also no mining, which protects against inflation.
Bank of America may also be more interested because Ripple has specifically focused on banks and, as such, is skirting some of the regulatory restrictions placed on consumer cryptocurrency. It’s also currency agnostic (like gold). The system is protected from denial of service attacks by charging a small fee for each transaction ($0.00001).
The platform has also won over other banks, including Santander, Axis Bank, Yes Bank, WestPac, Union Credit, NBAD, and UBS.
While Bank of America has shied away from blockchain-powered cryptocurrency, competitor JP Morgan Chase has gone the opposite direction. The institution announced its JPM Coin in Februrary, making it the first major U.S. bank to take the plunge. However, it isn’t a mass market currency, with JP Morgan Chase limiting it to vetted clients. When asked, Bessant said she’s skeptical that it will draw high volumes.
Blockchain continues to be hot right now, and with players like JP Morgan Chase in the fray, it’s getting a boost. Cryptocurrencies are volatile though, and if there is one thing incumbent financial establishments dislike, it’s uncertainty. Striking the balance between technology and stability continues to be the fulcrum on which the financial industry balances.