Blockchain Banking: The Future of Money and Finance

User profile photo
By Gerelyn
Estimated reading: 6mins
Blockchain Banking

What Is Blockchain Banking

Ready or not, blockchain banking is here. All you have to do is look at JPMorgan’s blockchain-based platform Onyx or Silvergate’s crypto startup roster to see how far this banking transformation has come. Blockchain banking is still being defined but in a nutshell represents banks adopting money-related technology to transform the world of financial services. 

In his book, “Blockchain Banking,” author Monty C.M. Metzger likens the relationship between the blockchain and money to that of email and the letter. The idea here suggests that blockchain will replace traditional banking the way that email has disrupted postage stamps. Are you ready for it? 

To be sure, blockchain-based strategies do not mean the same thing to every bank. However, one common denominator is that the technology is present to strengthen financial security, disrupt legacy banking and pave the way for smart contract integration. 

Three of the key themes that are present in blockchain banking include security, smart contracts and efficiency. Let’s look at each of them in some more detail. 


Financial transactions have a target on their back for fraudulent behavior, underscoring the importance of security. Crimes that are economic in nature can have a damaging effect on financial institutions like stock exchanges and banks, the vulnerability of which is due largely to the centralized nature of these organizations; hence the need for a more reliable and secure financial system. 

Enter blockchain technology, a decentralized system that embodies the security that financial systems command. This is thanks in large part to distributed ledger technology (DLT), a decentralized database that allows for the introduction and validation of transactions across a network of computers. The risk of a single point of failure is therefore eliminated, as is the possibility of lost data.

Think of the blockchain as a public ledger, one in which transactions and events are updated in real time and shared among the network. Considering everyone involved has the same data, greater efficiency, transparency, and cost reductions are achieved. 

Smart Contracts 

The one-two punch of DLT and smart contracts further ensures the security of the network. Smart contracts, which originated on the Ethereum blockchain, are digital agreements that are automatically executed on the blockchain when certain preset parameters are reached. As a result, there’s no need for trusted third-party involvement, lowering the risks of failure even more. 


Something that even the largest banks (aka JPMorgan) cannot deny is the efficiency that blockchain technology brings to the table in financial services. Traditional financial transactions are slow and riddled with potential errors. As blockchain pioneer Brad Garlinghouse once stated

“Another thing that is often lost upon us is the opaqueness of the problems that correspondent banking currently operates. There is a 6% error rate, self-published, 6% of all SWIFT transactions require human intervention.” 

With DLT, the processes that banks traditionally rely on paper trails for will instead be digitized, cutting down on the time, cost and labor required to complete them. The risk of human error is greatly lowered while the costs related to trade finance are also significantly reduced.  

Digital Currencies

Blockchain banking would not be possible without the rise of digital currencies like bitcoin and stablecoins, for example. With digital assets and the blockchain, paper money that is synonymous with traditional banking could go the way of the dinosaur.  

Digital finance is here, and the scene is getting crowded for banknotes. Bank notes and coins have already lost much of their luster. Now that crypto has entered the fray, there’s less of a reason to hold onto this antiquated way of transacting in the marketplace.

Money has been evolving for thousands of years, from the days of using livestock for trade to the emergence of paper money. The internet has made it possible for a new and improved form of money, one that is more secure and efficient than the old version. 

This is where cryptocurrencies and the blockchain come in. Blockchain platforms enable the transfer of digital assets in a secure, efficient and transparent way. Payments are sent peer-to-peer, removing the need for a financial intermediary. The world is changing thanks to technology, and the role of banknotes is disappearing. 

Blockchain Banking Examples 

Silvergate Bank

San Diego-based Silvergate is a crypto-friendly bank that is the go-to financial institution for crypto startups. The bank has filled a need in the cryptocurrency industry as traditional banks were leery of providing financial services to an unknown industry early on. 

As of 2018, the bank had nearly 500 crypto companies as customers that deposited a combined $1.7 billion. Since then it has added more customers including crypto exchanges and other service providers like miners and custodians as well as investors. Silvergate is also in the business of issuing bitcoin-secured loans to companies. 

JPM Coin 

A more famous example is Wall Street bank JPMorgan. We mentioned its blockchain platform Onyx, which is fueled by the firm’s native digital coin dubbed JPM Coin. 

JPM Coin, a stablecoin, supports real-time payments on the blockchain and is pegged 1:1 to the U.S. dollar. It slashes settlement times for other banks sending cross-border payments from a few days to instant settlement, thanks to fewer intermediaries needing to be involved. 

Is Blockchain Banking the Future? 

Blockchain Banking

Everyone from community banks to major financial institutions is adopting blockchain technology in some form or another. Market leaders like JPMorgan have been early movers, while others are waiting to see how the industry evolves before jumping in. 

Without a clear regulatory framework, it’s hard to expect them to put the cart before the horse. However, as legislation and regulation around the blockchain in financial services take shape, banks are going to be among the first to respond. They will be hard pressed to ignore the benefits that blockchain technology brings to banking, not least being faster and cheaper transactions and settlement times. 

Is blockchain banking to replace traditional banking? We harken back to Metzger’s example of email to the letter. While email technology has certainly disrupted the postal service, it has not replaced it altogether. There is still a need for people to send letters, packages, etc. through snail mail. 

In the same way, blockchain banking is poised to further disrupt legacy banking, probably not replace it altogether. Deep roots have been dug around the payments rails that are already in place in the financial system, and they will not easily be displaced. However, they’d better get used to the new sheriff in town.

Join The Leading Crypto Channel


Disclaimer:Please note that nothing on this website constitutes financial advice. Whilst every effort has been made to ensure that the information provided on this website is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we strongly recommend you consult a qualified professional who should take into account your specific investment objectives, financial situation and individual needs.

User Avatar


Gerelyn is a financial journalist who has been covering Wall Street for more than 20 years. After reporting for some of the top trade publications on investment banking, infrastructure and retirement, she was drawn to decentralization and shifted her coverage to the blockchain and cryptocurrency space in mid-2017. Since then, she has contributed to several major Bitcoin, Blockchain, and DeFi news sites, and has also written a children’s book.

Search The Blog
Latest Video
Latest Youtube Video
Latest Podcast
Latest Podcast
Newsletter Subscribe
Share This Article
The LL Librarian

Your Genius Liquid Loans Knowledge Assistant