The Spanish multinational bank, BBVA, languish in making its decision on holding cryptocurrencies. BBVA's course of using blockchain transaction in giving loans, circumventing the legal and the regulatory ground of holding Ether to conduct their transaction placed the institution in a dilemma.
BBVA's Dilemma On Holding Cryptocurrencies
A Spanish multinational bank BBVA is in dilemma of holding cryptocurrency for conducting its transactions. The bank has achieved the status of the first financial institution to combine public and private blockchains in a live transaction. However, In an attempt of conducting the third in a series of blockchain-based corporate loans, the bank is in dilemma of how to work around a lack of legal and regulatory clarity on whether it should or could hold Ethereum, the cryptocurrency needed to power transactions on its blockchain.
Holding onto the terms of European Banking Authority (EBA) has seen them not use Ethereum token which will serve as a kind of fuel to update the ledger before the transaction could be completed. Alternatively, the institution had taken another route of anchoring the loan to an Ethereum testnet, a blockchain which stimulates the live version but does not affect the real value. The dilemma of not using Ether or not has generated a heated debate.
According to the managing director of corporate and investment banking at BBVA, Alicia Pertusa states that the 2014 EBA recommendations for European banks, banks are discouraged from owning, buying, and selling of any cryptocurrency. She further says that the process taken is the same thing with what it would have been on the main Ethereum blockchain, but differ with the regulator's approval before the use.
Even though the regulators might have stated that The 2014 EBA recommendation is not legally binding on them, however, the compliance department of a bank will have to make its decision on the usage of the cryptocurrency for such transaction.
On the regulatory demand, there has been a previous warning against involvement in cryptocurrency by EBA chief, Andrea Enria in March, by stating that they will be more effective in preventing banks from holding cryptocurrency and not just regulating the tokens alone.
On the regulation, EBA informed Coindesk that,
“The EBA has issued several warnings to consumers regarding virtual assets and has discouraged financial institutions from gaining exposures to such assets given their high-risk nature. However, as a matter of EU banking law, there is no prohibition on financial institutions gaining direct or indirect exposures to such assets.”
Meanwhile, BBVA is into real corporate loans of €75 million to technology company Indra in April; and last month's €325 million to oil and gas company Repsol; and previous week €100 million to construction firm ACS but could not hold a few dollars worth of Ethers because of regulators.
Although there are clamors for public blockchain notarization, Pertusa told coindesk that,
“We see this as the future of public notaries because at the end of the day it's a public record of an agreement that's been reached privately. But a lot still needs to happen in that direction regarding regulation, admitting that this public blockchain has the same value as a public notary.”
While commercial banks are still in dilemma of using the public blockchain for transactions because of holding a little volume of Ethers, the usage has become popular in business firms. Public blockchains aid anchoring data, and creating a timestamped proof that the data existed at a particular time. Consensys and Amazon Web Services, has adopted the public blockchain for transactions, proving the importance of blockchain.