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RBC exploring cryptocurrency trading platform for investments and online purchases

RBC building in Toronto. Iain Sherriff-Scott for The Logic
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RBC is exploring building a cryptocurrency trading platform for investments, as well as in-store and online purchases, The Logic has learned. 

The trading platform would facilitate the buying and selling of individual digital coins, including Bitcoin and Ether, as well as the transfer of funds combining different types of cryptocurrencies. The bank is also looking into letting customers open bank accounts containing cryptocurrency.

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Talking Point

Four newly public patent applications reveal RBC is exploring the creation of a cryptocurrency trading platform for investments as well as in-store and online purchases. The bank is already using blockchain in some parts of its operations; in March 2018, it published a patent for blockchain-based credit scoring and in May 2019, the bank said it was using blockchain to verify client identities. The new patents suggest a wide variety of additional applications, including blockchain-based smart contracts and a variety of investment vehicles.

RBC would be the first Canadian bank to launch a cryptocurrency exchange or offer its customers crypto accounts. 

“I can’t think of one of the big banks anywhere in the world that has a patent that directly relates to a crypto exchange,” said Marc Kaufman, a Washington, D.C.-based partner at Rimon Law. 

RBC has applied for four patents in Canada and the U.S that lay out a sweeping vision for how it might integrate cryptocurrencies into its operations.

The U.S. patent applications, which were filed in April and became public in October, discuss how the bank can take advantage of the growing popularity of cryptocurrencies. 

“To individual users, managing cryptographic keys and transacting with different cryptographic assets can be a challenge. In some situations, cryptographic asset transactions may take time to be confirmed, and/or may not be compatible or supported by merchant systems or point-of-sale devices,” reads a patent.

RBC did not directly answer The Logic’s questions, including whether it plans to launch a cryptocurrency trading platform and if so, when it would launch. 

“As part of the innovation and discovery process, RBC, like many other organizations, files patent applications to ensure proprietary ideas and concepts are protected,” said spokesperson Jean Francois Thibault. 

Canada has a number of small cryptocurrency exchanges, but many have run into regulatory issues. Last week, Vancouver-based Einstein Exchange, which owes customers over $16 million, filed for bankruptcy. Vancouver-based QuadrigaCX, which owes nearly $215 million, went bankrupt earlier this year after its CEO died in 2018 and no one could obtain the information on the private key he used to access funds on the exchange. 

RBC’s applications suggest how it can avoid those kinds of issues, ensuring that private keys are easily locatable, while simultaneously abiding by other regulations, like anti-money-laundering provisions. They explain how a cryptocurrency fund would allow people to transfer a variety of bundled crypto assets—it offers Bitcoin, Litecoin, Ether and Ripple as examples—from one customer to another by updating the blockchain. 

This type of transfer is faster for the consumer than removing a coin from cold storage. It also saves the bank expensive computer processing time. 

“Just like a mutual fund makes stocks more accessible, this could make tokenized assets more accessible,” said Kaufman.

RBC is already using blockchain in some parts of its operations. In 2017, the bank announced it was using the technology to move payments between its Canadian and American banks. In May, it said it was using blockchain to verify client identities. But patent filings suggest a broader vision. In the past three years, RBC has published at least 27 blockchain-related patents seeking legal protection for a variety of systems, including credit scores, vehicle records, digital rewards, smart contracts, loan offerings and a variety of investment vehicles. 

Earlier this year, RBC CEO Dave McKay said the bank was looking at tokenizing a wide variety of assets: “We’re experimenting with taking an asset and breaking it into smaller pieces and registering that in a decentralized register called blockchain. You can take an asset or even a company and create a unit on a decentralized blockchain and then sell that into the marketplace.”

One patent application offers specificity on what kind of assets could be broken down. “In some embodiments, the data structure may represent a group that includes any combination of objects representing different crypto-assets, fiat currencies, equities, bonds, mutual fund units, other financial instruments and/or other representations of value or physical objects,” it reads. 

RBC is not the only institution to apply for these kinds of patents. Bank of America has published several blockchain-based patents in recent years. In July, Goldman Sachs received a patent for a crypto-settlement system. In the past year, Alibaba, Visa and Mastercard have all published patents for cryptographic transaction-based technology. RBC’s patents suggest Visa or Mastercard could be used to buy cryptocurrency that could then be transferred to an RBC account. 

While making that purchase, the bank could also automatically convert a cryptocurrency into fiat currency if a consumer is trying to pay for something and doesn’t have enough money. 

“When there are inadequate funds in the fiat balance, the system is configured to exchange one or more crypto-assets for fiat funds to fulfill the transaction amount,” reads one of the applications.

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RBC’s patents are becoming public as governments around the world are looking into launching digital currencies of their own. In October, The Logic broke the news that the Bank of Canada was exploring launching a digital currency that could share information with police and tax authorities. China and the European Union are both considering their own digital coins. 

These patents could let RBC trade such government-backed currencies, Kaufman said. 

“I would, and you would, and I think RBC would feel more comfortable exchanging a state-backed coin from China or Canada than Bitcoin.”