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Even before the advent of cryptocurrencies and blockchain, banks have been widely criticized for failing to innovate quickly enough, whether due to legacy back-end technology or policies such as overdraft fees that infuriated customers.
Now, the banking industry wants to get in on the action, especially with a friendlier regulatory backdrop under the Trump administration, which wants to make the U.S. the crypto capital of the world.
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Recently, a group of banks and state banking associations launched the BankChain Alliance, which aims to build and operate its own blockchain network.
What is the BankChain Alliance?
According to the BankChain Alliance’s website, the cohort includes 39 state banking associations comprised of 3,283 banks with a collective $21.8 trillion in assets. Kathy Kraninger, president and chief executive officer of the Florida Bankers Association, is the president and CEO of the organization.
The goal is to create an interoperable blockchain that all alliance members can use for a wide range of activities, including smart payments, tokenized deposits, stablecoins, automated settlement, and other innovations.
Kraninger said in a statement:
This is about banks of all sizes building their own future. Through an unprecedented collaboration representing thousands of banks, BankChain Alliance is developing a secure, regulated, industry-built, and industry-owned network that allows institutions of all sizes to provide modern capabilities so they can continue serving customers safely and efficiently in rural, urban, and regional communities across the country.
The BankChain Alliance is still searching for a technology partner to help it build the blockchain, but it is targeting a 2027 launch.
Why now?
The blockchain and cryptocurrencies were created as a direct alternative to the traditional banking system, after the disastrous Great Recession in 2008 that put banks in the limelight — and not in a good way. So, in some ways, crypto has always been a competitor to the banking system.
Stablecoins, digital assets pegged to a currency or commodity such as the U.S. dollar or gold, have also become a potential problem, offering a fast, theoretically inexpensive way to transfer money to someone with internet access. Some companies also began offering yields on stablecoins, posing a threat to bank deposits.
