Are the banks preparing to use Blockchain technology to get rid of cash?

It has been a few years since J.P. Morgan’s commodity head Blythe Masters was ‘let go’ from the bank in 2014, only to resurface as the head of a new digital finance company focused on Blockchain technology. And while there have been many startups around the world creating their own blockchain innovations, many of which are centered around Bitcoin and other crypto-currencies, one has to wonder what agenda Blythe Masters intends for the technology in her new company.

The reason this question is important is because a new report came out on May 2 of a secret meeting between 100 financial executives where blockchain technology was used to create a Larry Summers frankenstein…

Purely digital dollars.

On a recent Monday in April, more than 100 executives from some of the world’s largest financial institutions gathered for a private meeting at the Times Square office of Nasdaq Inc. They weren’t there to just talk about blockchain, the new technology some predict will transform finance, but to build and experiment with the software.

By the end of the day, they had seen something revolutionary: U.S. dollars transformed into pure digital assets, able to be used to execute and settle a trade instantly. That’s the promise of a blockchain, where the cumbersome and error-prone system that takes days to move money across town or around the world is replaced with almost instant certainty. The event was created by Chain, one of many startups trying to rewire the financial industry, with representatives from Nasdaq, Citigroup Inc., Visa Inc., Fidelity, Fiserv Inc., Pfizer Inc. and others in the room.

The event — announced in a statement this Monday — marked a key moment in the evolution of blockchain, notable both for what was achieved, as well as how many firms were involved. The technology’s potential has captivated Wall Street executives because it offers a way to free up billions of dollars by speeding transactions that currently can take days, tying up capital. But a huge piece of that puzzle is transforming cash into a digital form. And while some firms have conducted experiments, the Chain event showed a large number of them are now looking jointly at a potential solution.

“We created a digital dollar” to show the group at Nasdaq an instant debit and credit on a blockchain, said Marc West, chief technology officer at Fiserv, a transaction and payments company with more than 13,000 clients across the financial industry. “This is the first time the money has moved.”
— Bloomberg

Ending physical cash and moving money into a purely digital construct is the maniacal dream of dozens of central banks who have now found themselves forced into policies of negative interest rates. And as basic human nature is proving out in places like Austria and Japan, anytime depositors have the power to remove their money from a banking system, the power of negative interest rates becomes moot without the use of capital controls, and a banning of physical cash.

There are many signs that Western banks are desperate to control all outflows of cash, especially when just this weekend Charles Schwab informed customers they were cutting off money market accounts in favor of storing customer cash in U.S. Treasuries. And in addition, Interactive Brokers on Sunday announced they were imposing negative interest rates on all Yen based accounts they manage.

Lack of liquidity was the real underlying factor in the 2008 financial collapse, and as the world divests themselves from dollar denominated assets in increasing numbers, this same fear is causing governments and central banks to reach for new draconian ways to keep their corrupt systems afloat.

And it appears that banks are now racing against the clock to try to bring online a blockchain based system that will accommodate the end of cash, and force the world into a completely digital currency of their making.

Rogue Money
Ken Schortgen JR
May 3, 2016