In brief

  • US Acting Comptroller of the Currency Brian Brooks says blockchain will disrupt banks.
  • The regulator sees banks becoming "directly connected to blockchains" and using them as payment networks.
  • Brooks added that banks will shift away from functioning as an aggregator of dollars.

The US Acting Comptroller of the Currency, Brian Brooks, struck a chord with attendees at this year's DC FinTech week, suggesting that banks were relics of a “pre-technology era” and will face substantial disruption by blockchain.

Brooks, formerly chief legal officer at crypto exchange Coinbase, suggested that the future would see banks “directly connected to blockchains, where they will see that as a payment network and they will become nodes on that network.”

How decentralization will disrupt banks

Banks’ “legacy role” as an aggregator of dollars could be disintermediated, said Brooks, who added that centralization was no longer required for efficiency or to provide services such as deposits or loans.

"Does anyone want to take my $10,000 and pay me 5%? And the algorithm will find somebody who does," said Brooks, in an echo of the emerging world of decentralized finance (DeFi) protocols. "All of a sudden, there’s no longer value in the bank aggregating all that money together. Because the technology is substituting for the aggregation function of banks," he added.

However, this isn't a death knell for banks, Brooks hastened to add. According to the regulator, banks will remain in vogue for fiduciary services, advice, and custody of physical assets. 

"I think there’s a huge role for banks," Brooks continued. "But it’s a transformational role.” Instead of functioning as an aggregator of dollars, he argued, banks will focus on “higher value add, higher profit services.”

With crypto exchanges blurring the lines between the worlds of cryptocurrency and traditional banking, that future could arrive sooner rather than later.