Fintechs and incumbent financial services players have increasingly been investigating how to boost their clients’ access to cryptocurrencies.
On Tuesday, European fintech BrickCoin announced it will be rolling out brickcoins, a new proprietary cryptocurrency underpinned by blockchain, and backed by real estate held by Real Estate Investment Trusts (REITs).
REITs invest in real estate markets through property, and are traded on exchanges like stocks. The company itself is not yet active, but it’s been registered in the UK, US, and EU. It’s as yet unclear which markets BrickCoin will draw on, but its Twitter account suggests it will leverage US real estate. BrickCoin says it wants to help individuals protect their money against unfavorable market conditions like rising inflation via a strictly regulated, stable, yet liquid asset — brickcoin.
The company says brickcoins will offer both high liquidity and regulatory safeguards. Each brickcoin, which can be bought with either fiat or crypto currencies, will represent an investment in a piece of mortgage-free real estate held as part of a REIT, a highly regulated investment vehicle. Brickcoin transactions will be managed, authenticated, and tracked using blockchain technology. BrickCoin says that by backing its cryptocurrency with a mainstream, stable asset class like commercial real estate, it can guard clients against the risks entailed in buying cryptocurrencies such as bitcoin, which are unsecured by any mainstream assets.
In addition, brickcoins will offer higher liquidity than savings and fixed income accounts, which usually do not allow for quick payouts; and hedge funds, which are often prohibitively expensive for most consumers. Brickcoin buyers will be able to exchange their tokens back into fiat currency instantly whenever they want, gaining back their original investment plus any appreciation it earns.
BrickCoins’ approach seems to tackle several remaining obstacles for cryptocurrencies. As more financial services institutions give their clients access to cryptocurrency investments, a major risk is that most digital assets do not fall neatly into any mainstream asset categories, resulting in weak consumer understanding. In addition, they are not clearly in the remit of any regulators, leaving investors potentially unprotected against unscrupulous players. Moreover, as bitcoin and Ethereum prices rise rapidly, there is the risk of a bubble and subsequent crash.
By backing its cryptocurrency up with an asset that’s already heavily regulated in virtually all jurisdictions, and which has clear benchmarks to regulate its value, BrickCoin stands a good chance both of reducing risks for its clients, providing clarity for its regulators, and thus attracting more users. We may see more cryptocurrency developers reinforcing their tokens in the same way.
Nearly every global bank is experimenting with blockchain technology as they try to unleash the cost savings and operational efficiencies it promises to deliver.
Banks are exploring the technology in a number of ways, including through partnerships with fintechs, membership in global consortia, and via the building of their own in-house solutions.
Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on blockchain in banking that outlines why and in what ways banks are exploring blockchain technology, provides details on three major banks’ blockchain efforts based on in-depth interviews, and highlights other notable blockchain-based experiments underway by global banks. It also discusses the likely trends that will emerge in the technology over the next several years, and the factors that will be critical to the success of banks implementing blockchain-based solutions.
Here are some of the key takeaways from the report:
- Most banks are exploring the use of blockchain technology in order to streamline processes and cut costs. However, they are also looking to leverage additional advantages, including increased competitiveness with fintechs, and the ability to use the technology to create new business models.
- Banks are starting to narrow their focus, and are increasingly honing in on tangible use cases for blockchain technology that solve real problems faced by their businesses.
- Regulators are taking an increased interest in blockchain technology, and they’re working alongside major banks to develop regulatory frameworks.
- Blockchain-based solutions will start to emerge in different areas of financial services. The most successful solutions will solve specific problems for banks and attract a large enough network to create widespread benefits.
In full, the report:
- Outlines banks’ experiments with blockchain technology.
- Details blockchain projects at three major banks — UBS, Credit Suisse, and Banco Santander — based on in-depth interviews.
- Discusses the likely trends that will emerge in the technology over the next several years.
- Highlights the factors that will be critical to the success of banks implementing blockchain-based solutions.
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