RBC's CEO pushes back on suggestion bitcoin is a fraud

The chief executive of Canada’s biggest lender on Thursday pushed back on a suggestion by JPMorgan Chief Executive Jamie Dimon that bitcoin is a fraud, though he said the cryptocurrency needs monitoring.

Speaking at a Reuters Newsmaker event in Toronto, Dave McKay, CEO of Royal Bank of Canada, said: ”Has Bitcoin misrepresented what it is? No.

“What it’s solving is a way to avoid detection in moving money in our society and transferring value from one person to another,” McKay said. “I think where Jamie is probably coming from is it’s helping evade the supervision of moving money and from that perspective it needs to be monitored.”

While banks have largely steered clear of bitcoin since it emerged following the financial crisis, the virtual currency is supported by a range of people, including technology enthusiasts, libertarians sceptical of government monetary policy and speculators attracted by its price swings.

Dimon earlier this month said that the currency “will not work” and said he would fire any JP Morgan staff who traded it.

McKay said that if RBC staff were trading bitcoin, he would “probably ask them to stop.”

RBC, however, is researching how it can utilize the distribution ledger technology that underpins bitcoin, called blockchain. RBC earlier told Reuters that it was experimenting with blockchain to help move payments between its U.S. and Canadian banks.

McKay said RBC is planning to use blockchain technology in its loyalty programs next year, the first time it has been used in a customer-facing application. He said the bank would initially use the technology in less risky areas where customers’ money would not be put at risk.

“Loyalty is something where if there is an error or a problem we could recreate loyalty systems without impact on people’s real money,” he said, adding that blockchain could improve the speed at which people can join loyalty programs, particularly merchants.

AI INVESTMENT

McKay said the bank is spending over C$10 million ($8 million) a year on artificial intelligence (AI), which can be used to predict customer behaviour and help reduce problems like credit card fraud.

RBC has set up an AI research centre in Toronto with a staff of 35 to conduct pure research with massive data that the bank possesses. However, McKay said there is a scarcity of talent in AI globally, which means that RBC has to spend a significant amount to attract people with specialist knowledge.

McKay said he expects competition to emerge from non-bank companies, particularly in the money-moving side of the business.

“If you have a mass consumer franchise with a strong brand and lots of data about that consumer I think the barriers to banking are coming down to the point where I expect there to be competitors,” he said.