Dutch State Owned Bank Calls Bitcoins Technology ‘The Next Big Thing’

ABN AMRO serves retail, private and commercial banking clients in the Netherlands and across the globe with a comprehensive range of products and services. According to the bank’s first quarter report, the large financial institution has a total asset value of $438.1 Billion Euros.

In an article on abnamro.com the Head of Innovation Centre at the bank, Arjan van Os, stated that, “What the Internet has done for information and the way we communicate, the Blockchain will do for value and the way we look at trust. The financial world is going to flip upside-down.” He continued, “Picture a day when the trust that financial institutions worked decades to build, can be duplicated electronically in seconds.”

“Think about a system, invented by anonymous strangers, which creates more security, speed and transparency than the financial world has ever seen. Science fiction? Hardly. That time is here.”
— – Arjan van Os

In the article, titled ‘The Next Big Thing,’ van Os describes the benefits of blockchain technology, and the new solutions that could be built on top of it. He highlighted smart contracts, which he called the “hidden gems” of blockchain technology, and also touched on the “unprecedented level of security” found in distributed networks.

“While Internet Banking caused us to shift the way we interact with customers, Blockchain technology could make our current business model obsolete.”
— – Arjan van Os

This is the most recent example of the large bank’s interest in blockchain technology. In Dec. 2014 ABN AMRO, along with fellow Dutch banks ING and Rabobank, became some of the first financial institutions to reveal that they were exploring blockchain technology.

“Banks are faced with competitors from outside of the traditional financial sector, who come up with new solutions,” said Menno van Leeuwen, the team leader at the ABN AMRO Innovation Centre. “If we ignore these developments, that might lead to surprises, which is undesirable … As banks, we have a lot experience in the field of providing customers with security, and we’re currently testing the combination with bitcoin.”

Van Os has long been a proponent of blockchain technology. Hegave a speech at the EBAday congress this May, an event organised by the Euro Banking Association and Finextra Research. At the congress he expressed his opinion that he sees potential benefits for banks using and adopting virtual currencies, especially in conjunction with other emerging trends like mobile and wearables. He also added that banks will need to move away from a closed system to a more open system, by providing APIs and adopting blockchain technology.

Following suit the banks Managing Director of Transaction Banking, Karin Kersten, gave a speech at a recent bitcoin conference in Amsterdam. At the event she revealed that the bank had developed a distributed ledger settlement system based on the Ripple protocol, called ABN Trade. The use of blockchain, or distributed ledger, technology for settlements between banks has been one of the more publicized use cases of the technology in the financial services industry. ABN Trade, according to Kersten, aims to automate trade and remove payment friction along large supply chains.

In April the bank held ‘Startup Friday,” a monthly pitch contest dedicated to blockchain products and services, for local startups talking to the financial industry. The contest was run to to inspire and promote ABN AMRO’s role as a lender, but also as a way for them to find startups to partner with. Kersten, who organizes and created the event, commented, " We make our network available to entrepreneurs, we match them with our business associates and in some cases we act as ‘pilot customers’. In this way we can truly add value. Financing is not a goal in itself – it comes into play only when appropriate."

While ABN AMRO appears to have been a been interested blockchain for some time, it is only one of a growing group of financial institutions from around the world interested in applying the technology to problems facing the industry.

Barclays has been exploring the technology, and sponsoring events that help Financial Technology startups gain traction in the industry. Safello, a Swedish-based bitcoin exchange, recently announced that it has signed a Proof of Concept agreement with the UK bank, exploring how the financial services industry can benefit from blockchain technology. The deal was one of the highlights of the Barclays Accelerator Demo Day hosted in London on June 22.

Barclays also recently launched its first US based FinTech accelerator, Rise. “It is time to redefine financial services,” said Michael Harte, Barclays’ Chief Operations and Technology Officer. “Rise is designed to help shape the future of our industry and drive growth. We’re seeking to connect the world’s most active innovators to each other, to corporates, and to resources and support networks.”

UBS has also been active in the space, exploring the potential legal ramifications of blockchain based business. UBS hosted the world’s first half-day Crypto Legathon 2.0 at their Level39 innovation lab in Canary Wharf, London. The aim was to bring the best legal and technical minds interested in digital currencies, smart contracts, and distributed ledgers to participate in an experimental court trial mock up.

Distributed ledger development companies, including Ripple and HyperLedger, have received a wide range of interest from financial institutions. Ripple Labs has partnered with several banks around the world, including a few American banks, and three of the ‘Big Four’ Australian banks.