More good news for bitcoin prices, the bitcoin Blockchain may replace SWIFT (the Society for Worldwide Interbank Financial Telecommunication) network. This prediction by Chris Skinner, a pro-bitcoin banking and technology veteran, has stirred controversy among mainstream banking circles.
Skinner, chairman of the Financial Services Club networking group in the U.K. and author of Digital Bank, made that provocative comment during a keynote he delivered at a recent conference.
A press article reported that Skinner said, “the coding behind virtual currency bitcoin could also prove to be enormously transformational, potentially even replacing the SWIFT network for interbank payments.”
Skinner writes of that remark and the debate that it created in his forthcoming book ValueWeb: How Fintech Firms are Using Bitcoin Blockchain and Mobile Technologies to Create the Internet of Value. (Source: “Will the Blockchain Replace Swift?” American Banker, March 8, 2016.)
SWIFT is the backbone of the banking industry worldwide. Built in the 1970s to replace telex machines with electronic transfers, SWIFT is a co-operatively funded network by the global banking system to let the banks send funds with confidence.
“Its very name shows its cooperative nature,” Skinner wrote.
SWIFT provides a network that enables financial institutions to send and receive information about financial transactions in a secure, standardized, and reliable environment. The majority of banks use the SWIFT network to send money.
As of 2010, more than 9,000 financial institutions in 209 countries were sending and receiving an average of more than 15 million messages per day, up from just 2.4 million a day in 1995.
Skinner believes that Blockchain, a technology that has more compute power behind it on a decentralized basis than any open source project in history, could fundamentally reinvent the banking system.
“The Blockchain is the core technology of the ValueWeb,” he said.
Defending his viewpoint and blasting his critics at the same time, Skinner said that the view that bitcoins are purely for payments is wrong: “Bitcoin, the protocol, and other cryptocurrencies are for the recording of digital value exchanges that can take any form from a payment to a marriage vow,” he wrote.
He dismissed the idea that bitcoin cannot threaten something like SWIFT, as SWIFT is more than just payments: “Bitcoin’s technology,” he asserted, “can record securities settlements as easily as a marriage contract or a payment.”
He also categorically refused the theme that upstart cryptocurrencies could not threaten SWIFT since the network has the scalability, security, resilience, and history that provide trust in the network.
“Bitcoin is now using more scalable and capable networking compute power than SETI, the Search for Extraterrestrial Intelligence, which was the world’s previously largest networked system,” Skinner argued.
“What I said was, ‘Bitcoin even has the potential to replace Swift for financial transaction processing.’ I didn’t say it would,” Skinner wrote.
Skinner said he has been writing about bitcoin all the time, “not because I’m promoting it but because it has the potential to reinvent banking, money and regulation as we know it.”
Bitcoin prices are down 5.6% so far this year. One bitcoin currently buys US$411.25.