Blockchain: the future?

What does the development of digital currencies and transactions herald for financial institutions like ING? And how can it change the manner in which we do business? ING investigates whether blockchain, the technology behind the bitcoin for example, can be used for the settlement of complex transactions. “No one can predict how big blockchain technology will be. But if it succeeds, it will be phenomenal,” says Mark Buitenhek, global head of ING Transaction Services.

Bitcoins have been a constant news item since 2009, although not always in a positive way. The bitcoin is the best-known virtual currency and is what is called a “cryptocurrency”: a digital currency whose price fluctuates on the open market. Bitcoin’s price has been volatile in recent years and this has not been beneficial to its reputation. Cryptocurrency allows the making of electronic payments without the intervention of a bank or other body. It is therefore the first decentralised digital currency. The money system is underpinned by an advanced technological register which records the transactions, namely the blockchain. In recent years, interest in the Bitcoin has shifted to the system behind it. Potentially, this could cause a greater revolution in the financial world than the Bitcoin itself. ING has joined R3CEV; a partnership of leading financial institutions that is going to collaborate further in the field of blockchain technology by, for example, investigating its potential use for the settlement of complex transactions. The consortium now comprises 42 financial institutions including Bank of America, Barclays, Deutsche Bank, Goldman Sachs and HSBC.


A blockchain is a distributed database in which all financial transactions are recorded. Encoding is used to prevent manipulation and falsification of data. A blockchain does not require an external body to guarantee the confidentiality of the transactions because the register is encrypted and is found on a global computer network where it is constantly updated. It is therefore impossible to make double spend transactions. The blockchain is primarily known as the system behind the Bitcoin but it can be used for many more types of transactions. More and more companies and investors see the system as the future for decentralised solutions. Startups in particular are immersing themselves in the system and, in 2015, a billion dollars was invested in bitcoin and blockchain startups.

Settling transactions via a blockchain alters the way in which we do business. It is able to replace all the functions that currently require a confidential adviser and personal contact with, for example, a bank or lawyer when buying a house is no longer necessary. The blockchain then serves as the supervisory body. The online register is an open system in which all the assets are recorded. When a transaction takes place, the buyer and seller make the transaction public and the register is then updated. The register also uses time codes. This prevents double spend transactions in respect of the same money or goods. 

Benefits for transactions

Over time, Blockchain technologies can eliminate the need for intermediaries like banks, governments and stock exchanges. Without the intervention of a supervisory body, transactions can be settled more quickly. In the case of simple transactions the benefits are limited, but when complex transactions are involved it can make a real difference. In securities dealing, different supervisory authorities are involved during the sale of a stock. Because of this, a transaction can sometimes take two days. By using a blockchain, the transaction is arranged immediately. The blockchain can therefore also be hugely beneficial when doing business internationally. Globally there are great ambitions for the blockchain but it is still unclear whether substantial amounts of data and transactions can be stored and distributed efficiently in this manner. Large scale use of the system is currently confined to virtual data. Banks annually process 300 billion transfers and payments worldwide. Blockchain technology has an open source operating system. Because of client confidentiality, a viable use for banks must be inaccessible or only partly accessible to third parties. One thing is clear: a lot more innovation is required in order to expand the use of blockchain beyond the Bitcoin.


Despite the uncertainties Mark Buitenhek believes that the blockchain has a future in banks. “It’s extremely interesting to investigate the potential of this new system further in the partnership we’ve entered into with the other banks. At first sight it appears to be a technology in which banks can be pushed increasingly to one side but it can actually take us forward in terms of the safer, cheaper and more effective storage of transactions. What’s more, the old systems won’t simply disappear. People still want to be able to talk to a familiar institution or knock on the door when they need good advice.” Mark Buitenhek expects that banks will see a blockchain breakthrough within 12 months. “The first step is to use the system for internal transactions. Goldman Sachs has already developed its own version of the bitcoin, the SETLCoin, to settle trades involving stocks and bonds. The Nasdaq is also taking its cautious first steps with this technology. No one can predict how big blockchain technology will be. But if it succeeds it will be phenomenal.”