CBAI Attends Banking Digital Currency Seminar

CBAI’s David Schroeder, vice president federal governmental relations, attended the Banking Digital Currency Seminar in Chicago on June 5, 2017. The Seminar was a joint initiative by the Illinois Department of Commerce and Economic Opportunity and the Department of Financial and Professional Regulation (both members of the Illinois Blockchain Initiative), together with Coin Center, and the Digital Currency Group.

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The Illinois Blockchain Initiative represents the first of its kind governmental collaboration aimed at understanding digital currencies and distributive ledger technology. The members of the Initiative believe that it is critical that banks and regulators understand the business models and the products and services in this space. The seminar was in part an opportunity for a wide-ranging discussion of the opportunities and challenges of engaging with these companies as a banking partner. The need for this engagement was highlighted by a recent study of the cryptocurrency industry indicating that sustainable banking relationships were one of the most consistent pain points for all industry participants.

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Presenters explained the various digital currency business types which include: wallets, exchanges, payment processing, special service providers, mining, and blockchain. Recommendations for bankers at this stage included: consideration of an early adopted advantage, gaining an appreciation for the nuances of the virtual currency ecosystem, critically assessing the nature of de-risking, and developing or drawing upon internal resources.

CBAI member, Michael Busch, President of Burling Bank in Chicago, was a presenter on a panel of bankers who together explained their decision making process and the operating methodology they employed in the banking digital currency companies (which included early and consistent engagement with their respective regulators).

Chicago is developing as an emerging fintech hub. It is a financial services epicenter that has a deep and talented workforce pool. The goal of the Illinois Blockchain Initiative is to foster financial innovation through early engagement, risk-based analysis, experimentation and global collaboration with engagement and assistance, education and training, and modernizing regulation. 

Given the market capitalization of Bitcoin at $43 billion (USD), and with an estimated 2.8 to 5.0 million users of Bitcoin (globally), banking digital currency is an emerging issue which provides community bankers with challenges but opportunities.

June 5, 2017