As a general rule, the financial sector is not one to move quickly. Economic systems really haven't evolved all that dramatically over the past few centuries, but recently the seemingly un-disruptable financial sector has been making some surprising shifts. And that's thanks in large part to blockchain technologies.

Slowly but surely, cryptocurrency proponents are onboarding traditional institutions to the opportunities offered by blockchain tech. Numerous platforms now exist to bridge old and new financial structures, and they're leading the way toward a more global, democratized banking system.

Mt Pelerin represents one vision for this financial future. The company has issued an ambitious plan to become the first blockchain bank in the world. It intends to merge old and new banking structures by bringing the bank's balance sheet on-chain and granting customers freedom in selecting banking services through a modular and open-source framework.

Here's how the Swiss-based company is striving to unlock the potential of an open banking system with the underlying foundation of Ethereum's blockchain--along with a glimpse into what that might mean for our collective financial future.

Bridging an Aging Banking Industry and the Digital Era

The modern financial landscape is enormously complex. It spans a wide range of institutions with complicated entanglements, hinges on legacy IT systems that may not integrate easily with new digital platforms, and includes a patchwork of regulatory buffers intended to mitigate market risks. As a result, many conventional banks are limited in their capacity to meet customer demands for better services.

The growing movement towards open-source protocols and decentralized infrastructure (which hinges on blockchain tech) has vast potential to enable banks to offer better services and more of a plug-and-play architecture for various financial instruments. Companies such as Polymath are already demonstrating this potential by providing a blockchain-based platform for issuing regulatory-compliant financial securities.

Mt Pelerin is looking to unlock even more integrated financial tools by bringing traditional banking services (and the entirety of their balance sheets) on-chain. Rather than providing one tool to complement existing banking structures, the company envisions an entirely open-source and modular banking system for tokenized assets of all varieties.

It's an ambitious goal, sure, but Mt Pelerin is already making big strides. By proposing the integration of old and new systems (as opposed to the complete annihilation of old ways of banking), the organization may have hit on a strategy for effectively enacting change within a notoriously un-changeable system.

Envisioning a New Way of Banking

In seeking to become a bridge between traditional financial and crypto assets, Mt Pelerin is focused on the broader scope of the financial ecosystem and not solely on becoming an IT provider. Instead, the idea is to bring an entire banking system onto the blockchain, enabling assets and liabilities (from national currencies to bonds) to be reflected as ERC20 tokens.

That might sound far-fetched, but Mt Pelerin has already developed a concrete vision for the features and benefits involved:

  • By tokenizing assets and liabilities, Mt Pelerin intends to unlock better liquidity for customers.

  • The automated structure of the platform will reduce costs, creating a much lower fee structure for customers.

  • Mt Pelerin will hold customer funds in 100 percent reserve (as opposed to investing them back into risky portfolios).

  • By building applications on top of the platform, Mt Pelerin intends to provide markets for service providers to connect directly with customers.

  • The company seeks to provide an open-source marketplace where issuers including small- and medium-sized businesses can leverage products for fundraising in ways that are largely precluded by conventional commercial banking services.

  • Third-party loan providers will be able to connect with the infrastructure via API calls, allowing customers to collateralize loans with providers using cryptocurrencies on the platform. As a result, cryptocurrencies could become much more useful investment vehicles.

If you're still having a hard time envisioning this kind of bank, that's understandable. It's a dramatic departure from banking as we've always known it. And that's exactly the point.

Mt Pelerin's vision is undoubtedly an ambitious one, but its emphasis on recreating a fairly traditional banking structure on the blockchain rather than forming a decentralized, autonomous bank represents a meaningful compromise between the cypherpunk narrative of removing all trusted third parties and connecting banks to digital assets in a regulatory-compliant manner.

With banks still heavily relying on legacy IT systems and handcuffed by regulatory buffers, the convergence of blockchains and financial assets may be an effective proposition for banks to evolve in the digital era.

Feb 20, 2019