Nick Ducoff recently expressed his views on banks and public blockchain technology on X (formerly Twitter). In his post, Ducoff advocated for banks to build on public blockchains, emphasizing that the Federal Deposit Insurance Corporation (FDIC) should support such innovation for the benefit of customers.
The Head of Institutional Growth at the Solana Foundation, Nick Ducoff warned the banking institution in a recent post on his X account. He stated that banks are at risk of losing in the “internet financial revolution” if they fail to embrace innovation for the benefit of their customers.
Ducoff went on to say that FDIC restrictions placed on banks could stifle innovation and cause banks operating in the US to lose out on major opportunities to modernize their operations.
The Solana Foundation actively promotes the adoption of public blockchain technology by financial institutions. It has several projects, such as a customizable blockchain solution aimed at high-volume finance and token extensions designed to make it practical for banks and other financial institutions to integrate blockchain technology into their operations.
According to Ducoff, public chains should be seen as an opportunity to expand services and reach new customers. Banks should prepare to function in a complementary role and build a hybrid financial system that combines the accessibility of DeFi with the trust and regulation that come with traditional banking.
The FDIC restricts innovation – Nick Ducoff
Documents recently obtained through a Freedom of Information Act (FOIA) request by Coinbase revealed that the FDIC limited US banks from using public blockchain networks for settling client transfers. It cited risks associated with public blockchains, such as exposure to bad actors and unregulated activities, as the reasons for the restriction.
However, Ducoff points out that banks already manage risks in other areas, such as internet banking and ATMs on dangerous streets. Rather than avoiding the use of public blockchains, banks should focus their efforts on leveraging the benefits and mitigating the risks.
The incoming US administration may give banks another chance to explore the potential of public blockchains.
Ducoff believes that if regulators, including the FDIC, fail to embrace these innovations, they risk pushing financial activity into unregulated spaces, leaving customers at more financial risk and banks becoming increasingly irrelevant.
Why banks should embrace public blockchains
Ducoff believes that public blockchains are also more efficient than the private blockchain networks banks currently operate with. He used Solana as an example, stating that the blockchain processes tens of millions of transactions daily while private blockchain networks cannot achieve similar results.
There are many more benefits to banks adopting public blockchain technology. Banks would make networks safer by providing regulation services. Their compliance infrastructure would also help prevent financial crimes.
The custody solutions provided by banks would secure the digital assets of customers. Bank participation would also deepen liquidity pools and reduce market volatility.
Just as banks once adapted to the rise of internet banking, they must now evolve to meet the demands of the new financial system. Institutions that embrace innovation will lead the charge to shape the future of finance. Those that don’t risk becoming obsolete in the “internet financial revolution.”
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