MIT report: Traditional financial services will eventually be replaced by virtual currencies (download the full report)

The latest fintech report released by the Massachusetts Institute of Technology (MIT) points out that traditional banking business will eventually "definitely disappear" and the future of banking business will mainly involve private and state-issued virtual currencies.

MIT: Traditional industries restrict innovation and development

The report, titled 《数字银行业宣言：传统银行的终结者？》（DIGITAL BANKING MANIFESTO: THE END OF BANKS？） co-authored by three scholars from MIT's affiliated science and engineering departments: Alex Lipton, David Shrier, and Alex Pentland. The report's views reflect the general view in the economic community that disruptive financial technology is inevitable in the future of international finance. The report states:

To survive and thrive in the 21st century digital economy, banks must digitize, but legacy systems and industries continue to hinder banks from embracing innovation.

The root cause is clear - traditional banks have always lagged behind in technological innovation; at the same time, the risk management capabilities of bank books are also weak.

Traditional institutions have mentioned the security risks of Bitcoin more than once. In their eyes, virtual currencies are improperly used and completely failed, so the relationship between the traditional financial industry and disruptive financial technology has become increasingly tense. MIT pointed out that in the future, the former must learn how to reconcile with the latter and achieve coexistence, which is beyond doubt.

The conflict between (cryptocurrency) and traditional banking provides a unique opportunity for the emergence of digital banks, which will use the most advanced technologies to achieve their goals, including cryptography and distributed ledger technology.

In addition, the architecture of digital banks is flexible enough to handle both private digital currencies (such as Bitcoin) and government-issued digital currencies.

Cautious support

Despite this, MIT has not shown fanatical support for decentralization and industry reform. In fact, Trond Undheim, a former senior lecturer at MIT, said in an interview with Bloomberg that although many supporters are crazy about it, virtual currency will not have absolute freedom.

Even Bitcoin enthusiasts are slowly beginning to realize that regulation is necessary. This is the only way for it to survive and the most critical factor in achieving Bitcoin's popularization.

However, the enthusiasm for blockchain in recent reports is obvious. Mark Mullen, CEO of British digital bank Atom Bank, pointed out that blockchain-based financial technology is the future of the global banking industry, a view that coincides with MIT.

Banks are trying to be cool and hip so they create awesome digital front ends… but that’s like putting lipstick on a pig, it’s still a pig and their fancy new front end is still connected to their crappy digital back end.