Why banks are more and more getting into the cryptocurrency market?
The argument that bitcoin is a highly volatile, new and unknown phenomenon is no longer relevant with the recent massive adoption of cryptocurrencies by public figures, international companies and banks.
In their early days, crypto-currencies were mainly seen as a way to bypass the conventional financial system. In the meantime, the main players in this system have also benefited from crypto-assets, despite the fact that banks have long been skeptical about bitcoin and other digital currencies.
On the one hand, many criticize crypto-currencies, especially bitcoin, for its notorious volatility. The controversies stem from a misunderstanding of the industry and adherence to more traditional views of money. We have financial giants like Warren Buffet, who states, “Bitcoin reminds me of what Oscar Wilde said about fox hunting.” He dismissed the idea of bitcoin becoming a global medium of exchange, saying it was too volatile to properly fulfill that role. And while many people agree with Buffet, volatility doesn’t have to mean that bitcoin has no future in a more serious setting. There are also personalities who seem to be indifferent, such as Bill Gates who said, “I don’t own bitcoin, and I’m not a bitcoin seller. So I’ve taken a neutral view.” Neutrality has both positive and negative connotations, how it is interpreted varies depending on one’s predetermined viewpoint, but in my opinion, it can be a gateway to a negative view.
What has led to this shift in the view of the sector? Apparently, growing customer interest is driving banks to offer innovative financial assets and products as well. As a result, many international financial institutions have announced their entry into the crypto-currency world in recent months. A few months ago, Morgan Stanley became the first major bank to announce that it would soon offer bitcoin funds to its customers. US banking chain JPMorgan Chase is also working on a similar service. In addition, their rival Wells Fargo recently announced that it would launch an actively managed crypto-currency fund. For its part, Goldman Sachs is currently offering bitcoin-based derivatives to its investors and soon, options and futures based on Ether.
Mathew McDermott, Global Head of Digital Assets at Goldman Sachs, has detected this demand in hundreds of conversations with institutional investors and clients, as he explained in an interview with Handelsblatt in June: “Clearly there is a lot of interest in being able to access bitcoin.” Yan Zhao, president of technology provider NYDIG, gives another reason for this growing acceptance of bitcoin by financial institutions, “Banks are seeing a lot of money transfers to crypto-currency exchange platforms,” speaking to industry magazine Cointelegraph in May.
The reason traditional banks have shied away from digital assets for so long could also be related to the technical infrastructure required for these assets. To overcome this obstacle, Bitpanda recently launched its Bitpanda White Label product. This allows fintech companies, banks and platforms to create their own fully digital investment offering with their own brand look and feel, based on Bitpanda’s technical infrastructure.
Through Bitpanda White Label, we aim to help established and innovative players accelerate their digital transformation and offer crypto-assets, as well as custodial and portfolio management services to their customers. Over the past seven years, Bitpanda has successfully built a platform that offers users easy access to crypto-currencies and precious metals, used by millions of people in Europe. Now, with the idea of open innovation in mind, we want to pass on this experience and infrastructure so that digital financial products can spread further. In 2021, bitcoin is reveling in the attention it is getting from all sides. Its prices have reached historic highs above $60,000. Crypto is no longer a phenomenon or a trend, but it is the reality we live in. Curiosity is booming and people are starting to really understand what’s going on, overcoming the surprise factor of headlines. It’s critical that countries listen to opinion leaders and not hinder their development. There is still education work to be done; the countries that understand the opportunities that crypto-currency offers to their economy faster than others will be far ahead of the rest. We are experiencing a transformation of the economy and society from within and the potential is huge.