Bank of America (BoA) has filed a patent application titled “System and Method for Wire Transfers Using Cryptocurrency
.” The application was filed in March and published on September 17 by the U.S. Patents and Trademarks Office.
The BoA filing describes an alternative to traditional wire transfers. The funds are first transferred to a cryptocurrency exchange, then converted to a cryptocurrency such as bitcoin, then sent to another exchange, and finally converted into another currency for the recipient. In other words, BoA wants to patent the concept of using a cryptocurrency as a transparent intermediate step for fiat currency transfers.
“A system includes a memory and a processor,” reads the abstract of the filing. “The processor is coupled to the memory and causes the system to receive an electronic request for a fund transfer and initiate a debit of a first amount of a first currency from a customer account. In response to determining using cryptocurrency is optimal, the processor can transfer the first amount of the first currency into an account associated with a first cryptocurrency exchange and initiate the purchase of a first quantity of a cryptocurrency from the first cryptocurrency exchange. The processor can transfer the first quantity of the cryptocurrency to a second cryptocurrency exchange and initiate the sale of the first quantity of the cryptocurrency at the second cryptocurrency exchange. The processor is further able to initiate the transfer of at least a portion of the resulting currency to a recipient.”
The system includes means to determine which transfer method – including cryptocurrency – is optimal in a given case. The decision strategy is based on time factors, price factors, exchange rates, fees charged by third parties, volatility and other relevant information. If using cryptocurrency is found to be optimal, the system includes means to determine which cryptocurrency or exchange should be used. For example, the system “may choose a particular cryptocurrency exchange because the cryptocurrency is priced favorably (e.g., cheap if purchasing, expensive if selling) or because the cryptocurrency exchange has a relationship with the enterprise.”
BoA claims that the system described in the patent application can reduce or eliminate disadvantages and problems associated with traditional wire transfers. The application notes that enterprises handle a large number of foreign wire transfer requests on a daily basis, and foreign transactions are becoming more common. The BoA filing is focused on making cross-border transactions faster: “It may be desirable to conduct a foreign wire transfer in less time than what current foreign wire transfer systems allow.”
The proposed BoA system can bypass traditional wire services, reduce the dependency on third party networks, and increase the reliability of fund transfers. Cryptocurrency-mediated transfers permit completing a foreign fund transfer in less time than traditional wire transfers, avoiding delays that may be caused by third party systems and services. Furthermore, transferring funds using a cryptocurrency reduces the need to transfer customer data to third-party systems, thus increasing control and security of customer data.
As usual with patents, the application tries to cover all possible technical implementations and use cases, and defines cryptocurrencies in a generic way. “A cryptocurrency is typically a peer-to-peer, decentralized, digital currency whose implementation relies on the principles of cryptography to validate transactions and generate the currency itself,” reads the filing. “Some examples of cryptocurrencies are: Bitcoin, Litecoin, Ripple, Peercoin, and Dogecoin. In some instances, a cryptocurrency, such as MintChip, may be backed by a government (e.g., Canada).”
Today, many banks and financial operators are warming up to the potential of digital currencies to reduce the time and cost of fund transfers, especially cross-border transfers. The BoA patent application tries to cover both existing and future cryptocurrencies, and all systems that use a cryptocurrency as a transparent intermediate step for fund transfers in fiat currencies. It seems likely that BoA is trying to claim ownership of cryptocurrency-mediated fund transfers, which might become commonplace soon. Of course, the move has been criticized by Bitcoin users, for example in this Bitcointalk discussion thread