Banking and financial institutions can pay up to €20bn in fees for blockchain transactions
Banking and other financial institutions have the option of paying up to 20bn euros in fees to the cryptocurrency bitcoin, according to a new report from consultancy firm Avalere Capital.
According to Avalere’s research, the payments are being made via a range of mechanisms including “blockchain-based payment channels”, “virtual currency payment channels” and “e-commerce payment channels”.
“Bitcoin, which has grown in popularity and value, has become the de facto standard for electronic payments,” the report, which was released today, said.
“But what if a payment could be made on a blockchain without the need for a central bank, which then has to process the transaction?”
Avalere’s report, “Blockchain Payment Systems and the Bitcoin Payment System: A Case Study of Virtual Currency and e-commerce Payments”, is based on a study of virtual currency, blockchain-based payments and ecommerce payments in Europe.
The study also looks at the financial cost of transactions, which is estimated at €3.7bn.
The report, called “Bitcoin, the Blockchain, and Payment Systems”, also details the current state of bitcoin payments, including “the increasing adoption of bitcoin and the rise in fees”.
The study notes that payments in the cryptocurrency are already being made on “blockchains”.
“Blockchain payments can be made without a central issuer or a central point of failure, which provides a level of security and privacy,” the Avalere report said.
“However, it is important to note that the transaction fees associated with these payments are in the billions of euros.”
A payment can also be made in cryptocurrency via the use of a blockchain, where a single node in the network can verify and validate transactions.
“The Avalere study looked at the number of transactions using bitcoin and blockchain-linked payments in 2014, 2017 and 2021.
The firm said the average transaction fee charged by banks and other organisations for bitcoin payments was €1,500.
It also said the total fees paid by financial institutions and payment processors for blockchain-enabled payment systems was €6bn.”
The total amount paid for the blockchain-driven payments and the associated fees, including the blockchain payment channels, is expected to be about 20bn Euros,” the firm said.
The figures are based on Avalere consulting services that work with financial institutions in Europe, the US and Asia.”
Blockchains and the payment system are the future of payments in financial services, said Patrick Sauer, chief executive of Avalere.
“But in the past, the blockchain technology has been used for very limited and often un-transparent transactions, and we believe that the future for blockchain technology is more transparent, private and trusted.”
These services enable financial institutions to make better, more transparent and more secure payments, while also making it easier to pay in bitcoin.