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Will Bitcoin replace SWIFT?

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So I made a slightly provocative comment, as it turned out, during my keynote at PaymentsNZ.  It was picked up and referenced by Richard Meadows in yesterday’s article:  “[Skinner] said the coding behind virtual currency Bitcoin could also prove to be enormously transformational, potentially even replacing the SWIFTnetwork for inter-bank payments”.

This created a lot of debate, with many views expressed that showed a lack of understanding of what Bitcoin is amongst the audience.  This is not their fault.  Bitcoin is a fledgling technonerds method of recreating banking, but the fact that not one banker knew what the blockchain was (I asked this question and for hands to be raised; the only hand raised was by the Bitcoin guy in the audience) is just incredible.

It astounds me that I’m encountering this at many conferences.  I was at our inaugural Fintech Scotland conference, and asked the same question  there.  Blank faces.  I asked the same question at SIBOS.  Nope.

This is embarrassing to be honest.

We have a technology that is being developed in the open for almost six years now, that has more compute power behind it on a decentralised basis than any open source project in history, and that could fundamentally destroy the banking system … and only a miniscule of bankers are trying to understand it.

This is evidenced by the debate in PaymentsNZ.

First, there was the view that it’s purely for payments.

No.  Bitcoin, the protocol, and other cryptocurrencies are for the recording of digital value exchanges that can take any form from a payment to a marriage vow.

Second, that it cannot threaten something like SWIFT as SWIFT is more than just payments.  Half of SWIFT’s activities are in securities settlement for example.

Wrong.  Bitcoin’s technology can record securities settlements as easily as a marriage contract or payment. This is evidenced by the newly launched investment markets service, Colored Coins (the founder of this service and eToro for trading, Yoni Assia, is speaking at the Financial Services Club next Monday).

Third, that the upstart cryptocurrencies could not threaten SWIFT as SWIFT has the scalability, security, resilience and history that provide the trust in the network.

Wrong.  Bitcoin is now using more scalable and capable networking compute power than SETI, the Search for Extra-terrestrial Intelligence, which was the world’s previously largest networked system.

Fourth, that the Bitcoin blockchain is of interest but not the currency.

Well, I recently blogged about that and that’s wrong too.  You cannot have a blockchain in banking without a native currency and why would you replace bitcoin as the native currency when it’s had five years and thousands of man hours of development effort invested.

Fifth, that MtGox's collapse has destroyed all trust in bitcoins and its ecosystem.

Nope.  Just because a flaky trading system collapsed does not remove the robustness of the Bitcoin protocol.  This was purely the same as Northern Rock collapsing.  Does that mean you no longer buy Pounds Sterling?

Sixth, that it is difficult to use.

Yes, but that's changing fast thanks to the Bitcoin ecosystem.  Companies such as Circle and Ripple are changing the game and, as Donald Norman described this two years ago, Bitcoin is like the internet before Tim Berners-Lee gave us www dot.  It's changing fast and becoming easier faster, so keep watching this space.

Finally, that it’s not relevant because it’s just a cryptocurrency.

Wrong.  It’s a protocol, a commodity, a technology, a smart contracts system, a general ledger, a secure exchange … a many splendoured thing.

Now, I blog all the time about bitcoin not because I’m promoting it, invested in it (I was but that disappeared with MtGox) or desiring to see it succeed.

I’m blogging about bitcoin all the time  because it has the potential to destroy banking, money and regulation as we know it.

Marc Andreessen, super angel investor and co-founder of Andreessen Horowitz, a $4 billion+ venture capital fund in Silicon Valley.  Three key quotes:

“Every single smart computer science person I’ve had look into it has reached the same conclusion — Blockchain is a fundamental breakthrough in technology.” TechCrunch, February 2012

“We have a chance to rebuild the system. Financial transactions are just numbers; it’s just information.” Bloomberg, October 2014 

“I am dying to fund a disruptive bank.” Twitter, February, 2014

In other words he, and many other highly intelligent investors, are betting the farm that this will succeed.

Final point of clarification.  I said: “Bitcoin even has the potential to replace SWIFT for financial transaction processing”.  I didn’t say it would, and the fact that SWIFT are highly inclusive of Ripple, Colored Coins, the Bitcoin community and more in dialogue at SIBOS and elsewhere, shows that they are just as keen as I to highlight the import of these developments to their financial community.

It’s just a shame that the majority of that community have no idea what we are talking about (except BNP Paribas).

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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