Blockchain startups are now looking to sell tech to banks, instead of disrupting them. (REUTERS/Brendan McDermid)
Fintech startups used to be focused on making traditional banks obsolete. Now, it seems like they just want to sell them services.
Among the young companies going that route is itBit, a blockchain startup that has a regulatory license in New York state that allows it to deal in digital currencies such as bitcoin. It’s developing a product called BankChain, which would apply blockchain technology to clearing and settlement processes for banks, and is in the middle of a $50 million fundraising round, according to a pitch deck sent to investors and obtained by Quartz. The deck indicated itBit expects the round to close this quarter.
The company declined to comment.
itBit’s fundraising comes amid a big increase in investment into blockchain startups over the past few years, according to data from PwC.
These blockchain startups are developing software for banks to use in a wide array of financial services, from moving money and securities, to lending, and back-office management. Blockchain is essentially a digital ledger accessible to anyone that can store financial records and other data. (In the case of BankChain, the ledger could only be accessed by those given permission.) Because it lives on the internet, blockchain ledgers can be updated in real time and cheaply. Major banks like JPMorgan Chase and Goldman Sachs have been exploring the technology, and firms like the Depository Trust & Clearing Corporation (which is essentially an accounting middleman for banks) have started testing the technology, too.
In Sept. 2015, Chain, a blockchain service provider, raised a $30 million round from NASDAQ, Citi, Capital One, Visa, and others, and has been working on a pilot program with the NASDAQ exchange to issue shares of private companies. Digital Asset Holdings, a distributed ledger software company, led by ex-JPMorgan executive Blythe Masters, raised $60 million from her former employer, Goldman Sachs, and IBM, among others. DAH also announced a pilot program with the Australian Stock Exchange.