Estonia's LHV Bank sets up blockchain department

Although the Bitcoin industry has attracted the attention of some financial giants recently, the earliest institution to embrace Bitcoin and blockchain was Estonia's LHV Bank.

LHV Bank has been investing in this emerging technology since 2014, researching use cases, establishing partnerships with startups such as Coinfloor, and providing banking services to Coinbase. Last June, LHV went a step further and released its own Cuber e-wallet app, a blockchain-based wallet that allows users to send digital euros.

In 2016, LHV said they hoped to expand the scope of the technology's trials, indicating that LHV's goal is far greater than "creating another electronic wallet." In a recent interview, LHV's cryptocurrency product manager Juri Laur introduced the company's current projects and introduced the constantly updated industry articles.

Laur told reporters that LHV Bank is interested in digital currencies and distributed ledger technology:

“We support the core values ​​of Bitcoin — decentralization and open permissionless innovation. However, we are a bank and we must operate within a specific legal framework and must strictly comply with regulatory norms, which sometimes limits our options.”

At a time when other investors in the industry are cutting back on investments in startups, LHV Bank is developing a use case for digital currencies, and at about the same time, large financial institutions are publicly disparaging the use of Bitcoin technology in currency. However, Laur believes that LHV Bank has a different opinion from other peers.

He added,

“I think permissioned blockchains are suitable for certain use cases, but it loses a lot of key features without which the technology is no longer very valuable.”

He believes that LHV Bank has been experimenting with "blockchain agnosticism", so if an alternative blockchain becomes widely used in the future, LHV can adapt quickly.

He noted, for example, that he is hopeful about Ethereum, and that LHV hosted Ethereum founder Vitalik Buterin during his visit to Estonia.

Bank Project

When asked about the size and scope of LHV’s internal projects, Laur said the bank has not yet set up a separate department, but he noted that the bank is taking proactive steps to ensure employees are well versed in this emerging technology.

Laur excitedly told us:

“Crypto 101 is already part of the training for new employees, and I’m sure no bank has this course yet.”

Some major financial institutions have formed an alliance to jointly develop distributed ledger blockchain technology applications, and Laur then gave LHV's position on this trend.

LHV, who has long been interested in the bitcoin industry, said he was not interested in headline-grabbing collaborations, even if they might bring in revenue.

He said,

“I think we have a good enough understanding of the technology that we are fully capable of building our own proof of concept,”

Laur added that LHV Bank does not rule out the possibility of joining an alliance in the future, but he did not specify which alliance LHV would consider joining.

Discover the secrets of blockchain

Speaking about his own views on the technology, Laur said he first learned about Bitcoin in 2010, but it was not until last year that he began to understand its potential.

Speaking of this background, Laur said he understands why Internet companies such as Netflix have voiced their support for Bitcoin. The system we currently use is "not adapted" to the development of online commerce.

"Providing a means of payment for all countries in the world is the challenge facing an application like Skype, but there is no single payment method that can achieve this goal. Can Bitcoin or other cryptocurrencies solve this problem? I think it is possible."

The existing infrastructure is “old,” Laur continued.

This trend was also highlighted by Aite Group in its recent report, which found that blockchain is gaining popularity in the financial sector, in part because it can replace legacy systems.

Extended trials

Although Laur did not disclose whether LHV has developed a new proof of concept (POC), he did say that the Cuber electronic wallet, which the company developed with partner bitcoin company ChromaWay, is a “successful” project that LHV Bank is very keen to build other technologies on top of.

Laur said LHV Bank is preparing to use the technology for commercial purposes, a process that may include expanding its API as LHV wants to develop products with more use cases.

“Right now our wallet product is only available to our customers, but we are planning to expand our customer and product range this year.”

Laur continued: Cuber electronic wallet is just a foundation, but he pointed out that there are more ambitious goals in the future. He finally concluded:

“In short, our main goal for 2016 is to start solving real-life problems.”