The banks consider cryptocurrency to be the enemy, a threat to their very existence. This shouldn’t come as a surprise, considering that cryptocurrency was invented with the goal of fundamentally changing the financial system. Even though they are against crypto, they are not against the technology that makes it possible – blockchain. Blockchain is a “distributed ledger” where all the transactions made (in cryptocurrency) are maintained across several servers and each new transaction is instantly verified with and stored in each iteration. The blockchain is considered more secure than the current technologies (because it’s not stored in a single location, it’s very hard to hack) and since all the changes in a database have to be validated by each server (node), it may virtually eliminate fraud. Blockchain has several potential uses. It goes beyond simple everyday tasks like shopping online or topping up your Betway account. What it can do ranges from user identification to data sharing, digital voting, and – yes – banking. And Wells Fargo, one of the biggest American banks, has just announced that it will do just that.
Wells Fargo Digital Cash
Wells Fargo Digital Cash is, in short, a dollar-linked cryptocurrency, a “stablecoin” that it plans to use in its internal transactions. For those unfamiliar with the term, a “stablecoin” is a cryptocurrency that is backed by assets that are meant to offer it stability (as its name suggests). These coins offer the best of both worlds: they are as secure and fast as cryptocurrency while reducing its volatility to a minimum.
If you feel the urge to hit Google searching for an exchange where you could invest in WFDC, don’t – the token will not be used with the public. Instead, Wells Fargo will use it to speed up its internal transactions between its own locations. This is where the new system will show its worth: it will make cross-border transactions almost instant, and cut out a few middlemen in the process as well. For more details, take a look at the bank’s press release on the matter.
Not the first
Wells Fargo is not the first major financial institution to embrace blockchain: J.P. Morgan announced its own digital coin called “JPM Coin” earlier this year. Like the WFDC, the JPM is also meant to be used within the bank’s network only, to speed up transfers between its institutional clients. Just like Wells Fargo’s coin, this is also a dollar-backed stablecoin and not a bona fide digital currency.
Both banks are currently only experimenting with these new tokens in US dollars. If these experiments work out as planned, they will be expanded to cover more currencies, making international transfers – at least within the banks – faster and more secure. As secure as crypto transactions.