Blockchain: An Answer to the Current Banking Saga

The views and opinions expressed herein are those of the author only and do not represent the opinions and opinions of the crypto.news editorial.

UBS’s decision to acquire its competitor Credit Suisse, of course, once again shook the financial industry. This comes a week after the collapse of Silicon Valley Bank (SVB) and Signature Bank in the US, indicating that the financial situation is far from improving.

This, of course, is also a sign that the upgrade of our financial system is long overdue.

UBS will pay 3 billion Swiss francs (about $3.2 billion) for the acquisition, which is about 60% less than its value during the market close on Friday. And while that’s not usually the case, the law passed by the Swiss government will no longer require shareholder approval for a deal to move forward.

Without a doubt, Credit Suisse has not been the most popular among investors in recent years, reporting huge losses in the current financial crisis. In 2022, the bank saw a net loss of $8 billion, its largest annual loss ever. Last week, it disclosed “fundamental vulnerabilities” in the wake of the collapse of SVB and Signature Bank.

These positions continue to underscore the need to upgrade our financial system, preferably by offering a transparent and auditable approach to people who put their life savings and retirement funds into what they believe is a reliable institution.

In terms of traditional finance, the acquisition could further boost the banking sector as both UBS and Credit Suisse are major players in the industry. The combined entity will have a larger market share, which could increase pricing power and potentially reduce competition.

Isn’t it ironic that in a banking industry that’s still mostly technology-driven since the 1960s, we have the technology ready and waiting to be implemented? And while the technology from the 1960s is powerful on its own, it cannot provide a comprehensive answer to the problem of financial system transparency.

But the most important thing is that we have the means to improve the mentioned negative aspects of the traditional banking sector that ultimately lead to the downfall of major players such as SVB and Credit Suisse.

Blockchain technology is still not widely used by a number of industries though it has proven to be a great tool in improving the future where the financial industry is headed.

Essentially, by bringing blockchain technology into the traditional banking sector, we can help the public save billions of dollars annually in fees while reducing or even eliminating the need to trust third parties.

Blockchain is an auditable and transparent ledger of transactions and states, eliminating the need for shady bookkeeping practices to create bogus totals. On the blockchain, money cannot be created, multiplied or inflated. Meanwhile, solvency information is available for public scrutiny at any time.

Moreover, future developments in blockchain technology, such as zero-knowledge proofs, will allow customers to maintain a necessary level of privacy while providing full auditability on a scale unprecedented in human history.

However, the current financial situation makes older generations, who were already in similar circumstances, look back on past events.

People with dollar deposits in 2008 were lied to by bankers. This time, the liars are now central bankers, bankers, and bank regulators, making it increasingly difficult for people to trust the traditional financial system again, unable to regain the points it recently lost.

Meanwhile, the mistrust that has emerged in the blockchain industry since the current FTX disaster is not entirely fair, as the disaster has nothing to do with the underlying blockchain industry and technology. Sam Bankman Fried and his actions were the cause of the current meltdown. It was he who stole money from his customers. Ironically, this would not have happened if blockchain and decentralization were implemented. FTX is another example of a failure of the centralized financial system, not the blockchain.

Obviously, technology, any technology, is not easy to implement. But when it comes to blockchain, established institutions are reluctant to use it because they fear the unknown. The regulatory landscape in the US, including the SEC and CFTC, is making things more difficult for mass adoption of blockchain and cryptocurrency. They refuse to understand that blockchain technology will be better for both people And institutions.

Recent bank failures suggest something else. They are showing everyone that regime change is more urgent than ever.

About the author: Jesper Christensen is the Director of Operations for Panoptic. Jesper holds a PhD in Applied Physics and Computer Science from Cornell University and previously led a large research organization on Web3. Jesper has also co-authored a book on automated market makers: A practical guide to decentralized exchanges and cryptocurrency trading.