Why are many banking giants such as Goldman Sachs scrambling to research cryptocurrencies and apply for blockchain patents?

Why are banks joining the cryptocurrency race? To learn about the technology? To stay competitive? To ensure their dominance? Or to beat existing cryptocurrencies?

Cointelegraph conducted a Twitter quiz on this topic, in which more than 46% of the participants believed that banks are developing their own cryptocurrencies to ensure their dominance.

Goldman Sachs filed a patent as early as October 30, 2014. This patent was only recently made public. Goldman Sachs applied for a patent for its new cryptocurrency SETLcoin . This SETLcoin can be used in an electronic wallet.

The patent application states:

The wallet technology is capable of generating, controlling and storing a new cryptocurrency, SETLcoins, which can be used to trade assets, including securities (stocks, bonds, etc.) and/or cash equivalents, through a peer-to-peer (P2P) network.

Banks Bet It All on Cryptocurrency

It seems that banks are placing all their bets on cryptocurrencies. This is true for Goldman Sachs and Citibank, which also has its own cryptocurrency, Citicoin .

In August this year, the world's four largest banks, BNY Mellon, Deutsche Bank, Santander and UBS, announced their cooperation in developing their own digital currencies.

According to Japan's Asahi Shimbun, Japanese banking giant Mitsubishi UFJ Bank (MUFJ) also plans to officially issue its own digital currency MUFG coin in the fall of 2017.

Bitcoin technology works

This seems to prove that the technology behind Bitcoin is viable. Bitcoin's real-world use cases also boost confidence in cryptocurrencies and the blockchain technology behind them. Blockchain technology's features such as reducing bank settlement costs, facilitating currency transactions and peer-to-peer transactions are attractive to these large banks.

As Asahi Shimbun described MUFG coin:

The operation mode of MUFG coin is similar to that of stored-value cards in the form of electronic money, which are widely used in Japan. However, with MUFG coin, users can make P2P transfers at a lower fee, and can also pay for consumption directly with MUFG coins.

A smart choice

Initially, the banking industry viewed blockchain as a potential threat. Now, their attitude has changed: if you can’t beat them, join them.

It is a wise move for banks to take this step, because they know that once they join the game and start issuing their own cryptocurrencies, various regulatory measures will follow. Eventually, some existing virtual currencies, such as Bitcoin, Ethereum and Dogecoins, will also have to abide by the rules set by regulators. In a way, this is also a kind of coercion for cryptocurrencies.

In addition, banks can also use this opportunity to get rid of outdated banking systems such as SWIFT. SWIFT controls a large number of bank transactions. This can be said to kill two birds with one stone. It is a wise choice.

Continuous patent applications

American Banker reported in February this year that the U.S. central bank applied for 15 blockchain-related patents in 2014, and the number of such patents has reached 20 this year.

David Duccini of the Strength in Numbers Foundation believes that the phenomenon of banks applying for patents everywhere is a "defensive measure" for them to facilitate future political transactions, especially through the R3 platform.

The website of international business consultancy Alix Partners quotes comments by Catherine Bessant of the US central bank:

It is important to obtain patents related to blockchain...to protect our position. Although we do not know what the commercial use cases of blockchain are at present.

Impure motives

There are many reasons why banks like Goldman Sachs are involved in the crypto world. It may be to innovate, understand the technology, control the economy, or remove old operating models. We don’t know their intentions. But the only thing that is certain is that their motives are not pure.

In reality, banks are just doing everything they can to stay in the game, even if it means unethical means, as long as they can achieve their goals, they will do whatever it takes.

The primary purpose of blockchain technology is to liberate people from the "clutches" of banks, but banks make slight modifications to this open source technology and apply for patents to achieve their ulterior motives, which is to gain control over this technology.

As Niall Maye, Head of Marketing and Business Development at Sato.sh, said:

Imitation is the highest form of flattery.