Redefining transaction banking in a decentralized world of digital money
What is the future of transaction banking in a decentralized world of digital money?
In this paper, we propose a lean experiment design to formulate and validate hypotheses and gain practical experience on how decentralized digital money can change the role of commercial banks. The results from this experiment will be applicable to improve the existing- and develop new commercial bank business models surrounding both private (e.g. stablecoins) as well as public (the Digital Euro) forms of digital money. Learnings from prior initiatives show that for successful experimentation public-private, low-barrier, and open-source collaboration is required whilst ensuring compliance to regulatory demands. The time to experiment is now to drive change for the future of banking.
In the increasingly decentralized landscape of digital money, the question of whether banks will retain their right to compete in transaction banking remains unsolved. With faster and more efficient transactions outside the current banking system (e.g. stablecoins), the emergence of more specialized players offering new investment and service opportunities and a growing fragmentation of various forms of digital money, banks face the challenge of staying the trusted gateway for their customers.To remain relevant while leveraging open, public, and decentralized infrastructures, banks need to define how they can become the gateway into the world of digital money for the broader market. This requires a transition from being the trusted, central owner, and facilitator of transactions to becoming an access point to a decentralized public infrastructure, which complies with the highest regulatory, legal, and ethical standards. We have presented our approach at the Dutch Banking Association and established an industry working group led by Joris Dekker (ABN AMRO Bank N.V.), Sebastian Kortmann (University of Amsterdam - Amsterdam Business School), and Igor Mikhalev (EY-Parthenon).What are the missing pieces that will we be working on?
1️⃣ Common identity and KYC services and standards
2️⃣ On-chain privacy and selective disclosure mechanisms
3️⃣ On-chain transaction monitoring
We are open to participation requests, keeping this an open source and open collaboration initiative.
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