“Bitcoin Killer”? – Google and Citigroup develop “smart” bank accounts

In an interview with the Wall Street Journal last week, the Internet giant revealed that it was working with Citigroup on a project called “Cache”. These are “smart” Google bank accounts that will enable users to use Google’s additional services in addition to standard financial services.

 

No partner with a white vest

However, the selection of the project partner is not entirely uncontroversial, as Citigroup did not present a good picture during the financial crisis of 2008. Chuck Prince, its managing director, said at the time that his financial institution “had to continue dancing as long as the music was playing,” which sounded like a mockery in view of Citigroup’s situation.

Citigroup’s balance sheet was extremely poor, making it one of the causes of the crisis. As historian Adam Tooze writes, the financial institution’s books were already so risky in the summer of 2007 that an inevitable collapse threatened. 

Accordingly, the American central bank had to intervene to save the liquidity of the “Citi” as a “nail in the coffin” with massive aid payments, since the bank could not simply be left to its fate because of its systemic relevance. Subsequently, new laws were passed that significantly restricted the financial sector’s room for manoeuvre in order to avoid a comparable situation in the future.

 

Tech companies have acquired a taste for it

According to the Wall Street Journal, tech companies see their expansion into the financial industry as an important step to “be closer to their users” by collecting important data on their buying behavior.

A McKinsey study reportedly found that 58% of respondents would trust Google’s financial products, while only 35% would trust Facebook. Apple and Amazon also ranked higher in the survey at 56% and 65%, respectively.

Despite the potential added value of collecting user data, Google points out that data from its own payment service, Google Pay, is not used for advertising purposes and is not shared with third parties. This is expected to be similar in the new project. According to the Wall Street Journal, Google does not want to “get its hands dirty” with the Cache project and instead outsource the processing of financial services to Citigroup.

 

Google official Caesar Sengupta, who clearly distinguishes the new project from Facebook Libra, also emphasizes this:

“Our approach involves a close partnership with banks and the financial system. This way is more complex, but more sustainable”.

 

Google the Bitcoin gravedigger?

Forbes’ polemic formulation that the new Google project is a “Bitcoin killer” has already caused resentment in the crypto industry. This steep thesis seems all the more absurd to some voices in the crypto industry, as it propagates a turning away from the financial system anyway, says Bitcoin expert Stephen Cole, for example:

 

“A Google bank account is about as much a threat to Bitcoin as a new post office is a threat to email.”

 

The new cooperation with Citigroup is not the first narrative in which Google is declared Bitcoin’s gravedigger. Just a few weeks ago it was said that the Internet company had achieved a “quantum-mechanical superiority” that would mean a death sentence for technologies based on cryptographic methods, above all blockchain and crypto currencies. Ethereum co-founder Vitalik Buterin, however, put the hype about Google’s supposed “supercomputer” into perspective:

 

“My first impression of the so-called quantum mechanical superiority is that for true quantum computing it is about what hydrogen bombs were for nuclear fusion. This is proof that it is possible to generate energy from them, but that it is still far from being used sensibly.”

 

Andreas Antonopoulos, Bitcoin’s advocate, shares this view and sees no threat to the market-leading crypto currency in Google’s quantum mechanical achievement.