Bitcoins and banks and patents

Banks’ growing interest in Bitcoin is not news. Yesterday I came across a new twist: banks filing bitcoin-related patents. This development makes sense, given the increased activity in Bitcoin research. It looks like the banks, far from being terrified of the potential disruption, are jumping on board and seriously thinking about how this new method of value transmission can improve their operations and their service. By starting to file patents, they seem to be moving – however slowly – from research to actual implementation.

image via Death to the Stock Photo

Just last week the US patent office published a filing by Bank of America for a patent called “System and Method for Wire Transfers Using Cryptocurrency”. The idea is a simple exchange: client 1 exchanges dollars (for example) into bitcoins (for example), which are then transferred to client 2, who changes them back into its local currency. This way client 1 avoids hefty currency transfer fees, and client 2 receives the funds sooner (10 minutes or less, depending on the cryptocurrency, versus several days). In addition, client 1’s information is kept more secure, and stays with the originator (Bank of America), who obviously has complied with the Know-Your-Client/Anti-Money-Laundering laws.

The twist here is that Bank of America’s algorithm will decide whether a cryptocurrency is appropriate (there are cases in which it will be simpler to use traditional channels), and if so, which one.

Other financial services companies have tried the patents game: Western Union was granted a patent in 2014 for an alternative currency exchange. While it didn’t explicitly mention cryptocurrencies, it did refer to tokens and virtual “coins” in use at the time of filing in 2009. In 2014 Mastercard filed a patent for a “global shopping cart” that supports a variety of payment methods, including bitcoin. And Amazon, which seems to be on its way to becoming a financial services company, has been awarded a bitcoin-related patent for cloud computing payments.

Bank of America is the first “bank” to file a patent that would allow it to offer more flexible and lower-cost services to its clients. It certainly won’t be the last, and in the typical game of catch-up, we’ll probably see more activity in bitcoin-related patents filed by established institutions over the coming months. Barclays, UBS, Citi, Santander, ING and many other big banks have all acknowledged bitcoin “labs” dedicated to exploring and improving on the blockchain technology. Citi has so far said that the results of its experiments with Citicoin (a bitcoin-like in-house virtual currency) will be open source, which means that they have no intention of patenting, so that other brains can build on its work. But patents are a logical extension of private research, and an understandable way of getting some sort of return on the lab investment, as well as of stopping others from patenting “obvious” and/or proprietary technology.

A flurry of patent filings, which we’re likely to see over the coming months, is a good sign that case uses are being polished. Let’s hope that the patent office is sensible in which ones to grant. And let’s hope that patent filings are rapidly followed by implementation.

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