Will This Be The Year Crypto Gets In The Banks 10-K?
Over the past two quarters, the big banks haven’t had much to say about cryptocurrencies in their earnings reports or subsequent analyst calls.
The second quarter of 2022 could be the quarter that will change that.
As the big banks’ earnings season kicks off this week, as reported by JPMorgan Chase and Morgan Stanley on Thursday (July 14) and Citigroup and Wells Fargo on Friday (July 15), it looks like they have plenty more to discuss. : The Federal Reserve is so concerned about inflation that it is already talking about a second interest rate hike of 75 basis points despite growing signs of recession and Russia’s growing war in Ukraine causing uncertainty and political tensions.
Then there’s the fall of the crypto market that became a landslide in May, after a poorly designed stablecoin collapsed, taking away $48 billion in investor funds and a good dose of confidence in cryptography.
Later that month, at the annual Davos meeting of the crypto-friendly World Economic Forum, the CEO of Bank of America Brian Moynihan Told Yahoo Finance that it believes the bank “doesn’t lack [out] on anything” by staying away from crypto, adding, “we’re driving payments through the roof.”
But, he also suggested that Bank of America’s sidelining of crypto wasn’t by choice.
“The reality is we can’t do that,” Moynahan said. “By regulation, we are not really allowed to engage. We do not engage in accounts for people in cryptocurrency, we are not authorized to.
Underlining the Office of the Comptroller of the Currency’s stance on banks engaging in digital assets, Moynahan described the banking regulator’s stance: “‘You have to ask us before you do and by the way, don’t ask’, it’s basically their tone.”
It’s not much different from what the CEO of Capital One Rich Fairbank said during its fourth quarter 2021 earnings call on Jan. 25.
Asked about growing moves in recent quarters that have targeted products offered by FinTechs and neobanks, Fairbank highlighted how quickly these companies are able to act, saying that because “FinTechs are also unregulated … ways in which they move and operate that are inconsistent with the banking side of the business”
Highlighting “regulation that has tended to surround the banking space”, he noted that “the biggest drivers of growth have kind of been in the less regulated side of things, you know, in payments, platforms and cryptography”.
June 30, Bloomberg reported that the number of Bank of America customers using crypto has fallen 50% to 500,000 since early November – when bitcoin led the broader crypto market to an all-time high, before crashing at the end of the month. At $20,000, bitcoin’s value is now down about 70%.
Yet just two days earlier, the bank released a report following its “Web3 & Digital Assets Day” conference, saying “client engagement continues to grow and focus remains on development.” rapid and disruptive nature of blockchain technology, despite plummeting token prices and headlines suggesting ecosystem demise has arrived,” Coindesk reported. In mid-June, BoA said it found that 90% of crypto investors plan to buy more crypto within six months.
Bank of America said there was consensus that institutional investors were interested in entering the space but were waiting for regulations to be drafted.
See also: Senate Crypto Bill Debuts and Crypto Industry Takes Big Wins
It is happening. Along with a bipartisan bill recently introduced to regulate crypto assets by Sen. Cynthia Lummis (R-Wyo.) and Sen. Kirsten Gillibrand (DN.Y.), the U.S. Treasury Department released an update on its efforts to draft comprehensive regulations in response to President Joe Biden’s executive order, which requires a plan by September.
See more: US Treasury outlines international cooperation plan to curb digital assets
And at the start of the second quarter, Umar Farooq, CEO of JPMorgan Chase’s Onyx by JPMorgan blockchain division, said his digital currency JPM Coin was already being used to send payments around the world.
While banks may take longer than FinTechs to launch products, he said, they launch with “a scale a FinTech can only dream of,” CNBC reported. “There aren’t many places where you can deploy a new platform and that platform can go from nothing to transacting a billion dollars in transactions per day in a matter of months.”
There are other signs that banks are gearing up for crypto. Citibank selected a Swiss company in June to provide custody services for its digital assets.
Noting that it, like Goldman Sachs and JPMorgan, already offers bitcoin futures trading to its clients, Coindesk said Okan Pekin, global head of securities services at Citibank, said “we are seeing the increasing digitization of traditional investment assets as well as new native digital assets,” adding that the banking giant “is innovating and developing new capabilities to take support digital asset classes that are becoming increasingly relevant.
And banks are seeing top talent increasingly reluctant to wait for banks to get into crypto.
In April, Alex Kriete and Greg Girasole, co-heads of digital assets at Citi, left to start a crypto investment firm, Motus Capital Management, Blockworks said.
All of this suggests that now would be a good time for banks to talk about how they see cryptocurrencies impacting their bottom line in the near future.
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