Out of Hibernation

It has been almost a year since my last “Bankologist Chronicle”. A few friends politely asked when the next one was coming. Others wondered whether I had quietly retired from writing altogether. The truth is much less dramatic. Customer meetings became presentations, presentations became proposals, and proposals somehow became delayed flights, airport lounges and enough PowerPoint slides to qualify as an endurance sport. Somewhere along the way, writing quietly slipped to the bottom of my priority list. Looking back, I suspect my laptop spent more time at 35,000 feet than it did on my office desk.

There was another reason too. I had stopped being curious.

Every article I started writing somehow circled back to AI. As fascinating as AI continues to be, I felt I was beginning to tell the same story with different headlines. Rather than force another article simply because the calendar suggested it was overdue, I decided to wait until I found a topic that genuinely made me feel like a student again.

Over the past few months, that topic found me.

Every banking conference, customer meeting and LinkedIn feed seemed to have adopted an entirely new vocabulary.

Stablecoins, Blockchain, Wallets, Tokenization and the headliner jargon – Digital Assets.

At one point I seriously considered carrying a pocket dictionary, except I was not sure which words belonged in it.  After more than three decades working with banks, I suddenly felt like I had walked into a room where everyone was speaking a language I only partially understood.  Oddly enough, that feeling made me curious again.  That’s when I realized I didn’t need another banking textbook.  I needed a translator.

The Bankologist’s Translation

One thing I have learned over the years is that banking loves inventing new terminology. Sometimes the hardest part of understanding a new idea is not the concept itself, but it is the vocabulary. So I stopped trying to learn digital assets as a technology topic and instead began translating everything back into language bankers already understand.

• Blockchain – A shared ledger
• Wallet – A digital account that holds digital assets
• Stablecoin – A digital representation of a dollar
• Tokenization – A digital representation of something you already own

Notice something interesting? None of these ideas are completely foreign to banking. They are familiar concepts wearing unfamiliar names. That simple realization changed the way I approached every article, webinar and conference presentation that followed.

The Question I Should Have Asked Earlier

Like many bankers, my instinct was to begin by understanding blockchain. That turned out to be the wrong place to start.

Instead, I asked myself a much simpler question.

How does money actually move today and what’s different with Digital Assets?

When a payment moves through ACH, Fedwire, SWIFT or even an instant payment network, nobody is physically moving cash from one place to another. What actually changes are the records maintained by trusted financial institutions. Each bank updates its own ledger, and collectively those ledger updates become what we think of as moving money.

It sounds almost embarrassingly simple, and it is.  Once I realized that banking has always been a business of maintaining trusted ledgers, I stopped asking, “What is blockchain?” and started asking a much better question. Why would anyone want a different kind of ledger?

Suddenly blockchain didn’t feel like an entirely new financial universe. It simply became another way of maintaining trusted records of ownership.

A Casino That Explained Stablecoins

Blockchain was beginning to make sense.  Stablecoins, however, still felt like another piece of the puzzle.

Then I came across an analogy that I wish someone had shared with me earlier.

Imagine walking into a casino carrying one hundred dollars. You hand the money to the cashier, who gives you one hundred casino chips. Those chips are not dollars, and you certainly cannot use them to buy groceries on the drive home. Inside the casino, however, everyone accepts them because everyone trusts that every chip is backed by real money sitting safely in the casino’s vault.

Notice something important.  The casino chips do not create new money.  They simply represent money that has already been deposited.  The value is not created by the chip, but it comes from the dollars safely sitting in the vault.

Now replace the casino with a trusted stablecoin issuer and replace the chips with digital tokens.  Deposit one hundred dollars.  Receive one hundred digital tokens.  Whenever you want your money back, redeem the tokens and receive your one hundred dollars.

That’s why they’re called stable.

Unlike Bitcoin, whose value changes dramatically depending on market demand, a properly backed stablecoin is designed to maintain the value of the underlying currency. One stablecoin should equal one dollar because somewhere there should be one real dollar supporting it.

Then came the real lightbulb moment. Stablecoins aren’t trying to replace the dollar.  They’re trying to improve how the dollar moves. Suddenly, stablecoins stopped sounding like something invented by cryptocurrency enthusiasts and started sounding like something treasury teams would actually care about.

Why Bankers Care About This

That single realization completely changed the way I looked at digital assets.  As bankers, we instinctively think in terms of payment rails. ACH, Fedwire, SWIFT, RTP and FedNow all provide different ways for money to move. Stablecoins suddenly made much more sense once I stopped thinking of them as another form of money and started thinking of them as another way of representing the dollar.

The dollar hasn’t changed.  The way the dollar can move has.

That also explains why banks are paying attention. If stablecoins become another way to represent money, banks don’t suddenly become irrelevant. They continue to provide trust, compliance, custody, liquidity and the bridge between traditional deposits and this emerging digital ecosystem. Suddenly, this stopped feeling like a story about cryptocurrency and started feeling like another chapter in the evolution of banking.

A New Adventure Begins

Looking back, I realized that every Bankologist Chronicle has really been about translating change into language bankers already understand.

This time is no different.

Over time, I would like to try and continue translating this new vocabulary together.  Not by starting with technology, but by starting with banking. I would like to explore stablecoins, tokenized deposits, CBDCs, tokenized assets and the many new ideas that are rapidly reshaping our industry, always through concepts that bankers already know.

If you are anything like me, you have probably smiled through at least one conversation about digital assets while secretly wondering whether everyone else understood more than you did.

Perhaps they weren’t waiting for another blockchain expert.  Perhaps they were simply waiting for someone to explain digital assets in banker language.

I know I was.

Judging by some of the conversations I have had recently, I have a feeling I am not the only one quietly opening another browser tab after a meeting.

About this article: This article was originally published by Balakrishnan Narasimhan as part of The Bankologist Chronicles blog series on LinkedIn and is reproduced here with the author’s permission. The views and perspectives expressed are those of the author and are intended as independent educational and industry commentary.

Author:

Balakrishnan Narasimhan,
SVP, Head of Solution Consulting – Banking Products,
Intellect Design Arena Ltd