Global Banks Pouring Billions into Blockchain Development, Survey Finds

Global financial institutions have moved past the exploratory stage when it comes to blockchain technology and are now pouring billions into new commercialization initiatives, according to industry research published by the U.S.-based Greenwich Associates.

Blockchain Spending Surges

The Greenwich study shows financial institutions increased their blockchain budgets by 67% last year, spending a combined $1.7 billion on various commercialization projects. Ten percent of the surveyed institutions reported spending at least $10 million on blockchain technology in 2017.

The study, which interviewed over 200 financial institutions from around the world, noted a major shift in how banks view distributed ledger technology (DLT). In particular, the industry has moved “beyond the proof-of-concept phase” and is now actively rolling out commercial blockchain products.

Employment dedicated to blockchain initiatives doubled in 2017, with top-tier banks averaging 18 full-time staff working on the technology.

Among those surveyed, 14% reported to have successfully deployed a blockchain solution, with payments and trade finance targeted the most frequently. Cost reduction was cited as the biggest driver of blockchain adoption, though revenue opportunities, settlement time and risk management also factored into the decision-making process.

“More than half the executives we interviewed told us that implementing DLT was harder than they expected,” Richard Johnson, Vice President of Greenwich Associates, said in a statement. “Nevertheless, more than three-quarters of projects currently under development are expected to be live within two years.”

The Blockchain Economy

The global blockchain industry is expected to top $60 billion over the next six years, with the likes of IBM, Microsoft and Accenture leading enterprise-grade adoption. Much of that effort will be dedicated to creating new “digital economic infrastructure,” according to the India-based Market Reports Center.

In a recent study, McKinsey & Company tested 64 use cases for blockchain technology in a survey of 200 companies. Seven of the 24 financial services use cases identified were deemed to be the most viable. Researchers concluded that these seven use cases alone could generate between $80 billion and $110 billion in economic impact, with cross-border business-to-business payments being the most likely to benefit.

Enterprise blockchain only scratches the surface of the true size and scale of the distributed ledger economy. Hundreds of startups have raised tens of billions in financing for initial coin offerings (ICOs), which have themselves spawned multi-billion-dollar investment communities dedicated to buying and trading tokens.

Cryptocurrency markets are currently in a protracted downturn. Six months ago, they peaked above $840 billion. Recent developments in institutional adoption suggest banks and other financial service giants could drive the next leg in the crypto-market rally.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi