While the surge in bitcoin price makes the cyberpunk’s wet dream of a financial system without banks seem within reach, the underlying technology – blockchain – has reached the established banks that plan to use it for their disruption.

For years crypto- and blockchain technologies – led by Bitcoin – have promised that they will lead to a decentralised financial world. A world, where the banks will have far less power because it is possible to cut out intermediaries when private individuals transfer money to each other.

“A couple of years ago, people began to hear the shouts over the rooftops – that a new technology that could create a financial trust without intermediaries would come and disrupt banks. At that time we began to look at the technology,” says Ville Sointu, Head of DLT & Blockchain at Nordea.

Ville Sointu, Head of Blockchain and DLT at Nordea.

In practice, Nordea joined the blockchain consortium R3, which currently accounts for 70 of the world’s largest financial institutions – including Bank of America, Goldman Sachs and Deutsche Bank.

And here two years later, Nordea is no longer in doubt: Banks can copy Bitcoin’s idea, use the technology to make their closed blockchain and even remove some of the intermediaries in the banking business to make it more effective.

Banks can also remove intermediaries

First of all, the consortium has given Nordea competencies and understanding of what blockchain technology can and can not do for the bank.

“We have so far focused on research and prototypes, but now, real tangible projects are also on their way. For the past four months, I’ve been trying to focus the activities, and hopefully, we will see results about distributed ledger and blockchain next year, “said Sointu, who joined the position as Head of DLT & Blockchain in June this year.

He still does not want to disclose what the coming solutions are. But as an example, he believes that there is the potential to make existing infrastructure between banks more direct.

“The potential is grand, but when the first products are running next year, it will not be a revolution, but the first small step. Banks will also be able to do business with each other without the use of intermediaries – in the short and medium term, there is a potential for using crypto currency for settlement between banks,” concludes Ville Sointu.

New product opportunities for the customers

However, the new technologies will not only affect the relationship between the banks.

“Consumers will also get new, interesting products based on the technologies. But when they use the products, they should not notice whether we deliver the service on a blockchain or not – they just have to experience the benefits that the technologies provide,” says Sointu.

But he also believes, that delivering new products to consumers through blockchain gives the banks new issues to consider.

“We need to be careful when we consider putting real values on a blockchain in real products – especially when it comes to decentralised technologies.”

“If we lose trust, we no longer exist”

For banks, there is a great paradox in the blockchain technology: they know it works, but there is no regulatory framework for the new technology.

“Blockchain provides significant opportunities for the financial system, but if you want to replace intermediaries with technology in a new type of transaction based on blockchain, the legislation needs to change. Who is responsible for different levels of the process during a transaction – and what if something goes wrong?,” asks Sointu.

He believes that the existing legislation needs to change before Nordea can enter the crypto world at full speed.

“We are happy to follow the legislators, so we have to wait and see how the legislation matures in this market. But when the future’s public blockchains overcome scaling challenges and legislation, we will, of course, be there as a trust anchor for customers,” says Sointu.

Until then, customers, cryptophans and fintech startups must expect the banks to move cautiously in the new technology.

“We can be held responsible; It’s not okay if we lose our customer’s money. We are a major player in the banking infrastructure, and if we are making problems, it presents major problems for the entire infrastructure. That is why we are pretty slow. Confidence is all we have and if customers lose confidence, we no longer exist,” said Ville Sointu.