Bankers Get a Lesson in Bitcoin and Blockchain at the American Bankers Conference

The venerable American Banker held a conference called “Digital Currencies + the Blockchain” at a Convene center in mid-town New York to discuss the potential and perils of Bitcoin and the blockchain and if and how this could be used to aid them in the various roles and functions as financial intermediaries and beyond. The event was very well attended, mostly from the Wall Street crowd, with a presence from the largest banks, global custodians, correspondent bankers and even SWIFT.

The event was organized by Marc Hochstein, the editor of American Banker who presented a very nuanced history of Bitcoin to the crowd, stating that as much as it is tempting to “let the grown ups take over”, one should not forget what Bitcoin has made possible, referring to the ‘red pill’ from the movie The Matrix, and how learning about Bitcoin has allowed him to become a better journalist and gain an even deeper understanding into the world of banking, looking at various norms (such as two-day settlement of domestic fund transfers) with a critical eye.

The keynote speech was by Blythe Masters, the well-known Wall Street figure credited with inventing the Credit Default Swaps, who made a case for using the blockchain technology to settle various financial products like structured loans that can today take up to 20 days to settle. She referred to her firm’s acquisition of hyperledger, which allowed them to provide expertise both on ‘private blockchains’ and on Bitcoin. She referred to certain applications being better suited for Bitcoin, and certain others to be better suited on a ‘permissioned ledger’ that might make it easier for banks and financial institutions to follow.

The event had various panels with speakers from both the traditional financial industry and from the nascent cryptocurrency and blockchain startups.

Suresh Ramamurthi, the CTO of CBW bank that has partnered with Ripple discussed the implications of Bitcoin and digital currencies in moving money, while dismissing many of the crowning achievements of Bitcoin by providing a decentralized currency for the first time ever as ‘technology from the 80s’. He also made a case for inflationary currencies and refused to believe Bitcoin as a currency. He didn’t elaborate on his firm’s plans for using Ripple.

Preston Byrne made a strong case for blockchains with Bitcoin or a native token, stating that blockchains are just a piece of software and we should experiment with all kinds of different blockchains, with and without currency tokens in them. His firm, Eris industries, has built several of these, and he said he’s working with many large financial institutions as well. He also showed screenshots of applications like a decentralized Reddit, created on the Ethereum testnet.

On a panel about whether the blockchain can be separated from Bitcoin, Barry Silbert was the only one who took a strong stance on Bitcoin being the sole winner in this race and saying he saw enormous amount of money pouring into Bitcoin and the Bitcoin ecosystem in the next few years. He compared the market cap of gold with Bitcoin, saying that even if 5% of the gold market flowed into Bitcoin, the price would rise about a 100 times.

In a panel on the future applications of Bitcoin 2.0 and blockchains, Cheryl Gurz, the managing director of treasury servicers at BNY Mellon said it seemed like the blockchain was a technology looking for a solution, instead of the historic precedent where the bank defines a problem and the technologists work on presenting a solution. She stated there wasn’t a strong and compelling reason for the banks to use the blockchain at this stage, even though many banks look at the potential for blockchain technology to streamline certain existing workflows.

During a fireside chat with Benjamin Lawsky, he clarified his take on Bitlicense, strongly defending the regulations that he proposed at the NYDFS before quitting for a private consulting business. When asked about the criticism of creating a ‘revolving door’ in creating regulations that could potentially benefit his private practice, he said that he isn’t allowed to work on consulting with firms in helping them with BitLicense that he helped create, and his firm doesn’t work in this field.

A full panel session on regulation surrounding Bitcoin further added clarity to what the ideal regulatory environment should be around Bitcoin and the startups, and several questions were raised about how the BitLicense regulations were written to be vague and broad, thus making it very hard for startups to even know whether they should apply for one or not. Coin Center mentioned they are working in California to propose a law with very specific wording to provide clarity to entrepreneurs, which they hope will be a sensible model regulation in other states.

A panel of some established players in the market discussed the companies coming out of the digital currency ecosystem at this stage and how larger firms look at Bitcoin and blockchain technology and how it fits into the existing framework of large banks.

In the closing interview, Chad Cascarilla of itBit discussed his decision on becoming a New York charter.

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