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The surge in the popularity of cryptocurrencies has awakened the interest of several traditional financial institutions in the sector. According to a report by the American Bankers’ Association (ABA), banks are steadily looking for opportunities in crypto.
Banks Considering Crypto Partnerships
The report stated that the rise in customers' interest has encouraged banks to provide them access to cryptocurrencies. ABA suggests that one of the ways banks can do this is by partnering with crypto firms to offer access to crypto-related products. The document cited a survey by institutional crypto trading and custodial firm NYDIG that found that 80% of Bitcoin holders would move their Bitcoin to a bank if the bank had secure storage. The association says the increased profitability of the sector and client interest have given rise to why banks are considering such collaborations.
“With the increasing profitability of the crypto industry, banks have found it more lucrative to take crypto companies on as partners and their customers as clients while crypto companies need banks to provide access to the payments system to onboard and offload fiat deposits.”
ABA suggested partnerships that include a bank partnering with a blockchain payment firm to allow faster and cheaper cross-border transactions. The report also proposed that banks can partner with blockchain firms that offer lending processes. Other areas where banks can collaborate include KYC/AML, digital identity, reporting, and banking, where a bank could offer business banking services to crypto companies. Several banks around the world are already offering crypto-related product offerings. Some of them are JPMorgan Chase, Wells Fargo, Silvergate Capital, Goldman Sachs, Revolut, and so on.
Crypto Regulation In The US
The American Bankers’ Association also highlighted regulatory concerns surrounding crypto in its report. ABA urged the government and regulators to provide clarity around what type of crypto-related activities are allowed for banks. The report noted that while the regulators focus on promoting innovation alongside protecting citizens against risks, regulations should evolve. This is important because of the rapidly changing crypto sector. ABA’s report comes at a time where US lawmakers are pushing for a cryptocurrency regulatory framework. On July 26, Senator Elizabeth Warren sent a letter to Treasury Secretary Janet Yellen urging the Financial Stability Oversight Council (FSOC) to coordinate a regulatory strategy surrounding cryptocurrency. The chair of the Senate Banking Committee's Subcommittee on Economic Policy emphasized the need to address cryptocurrencies' risks to ensure the safety and stability of the financial system." The Securities and Exchange Commission chairman Gary Gensler recently revealed, as reported by Bloomberg, that the agency has started looking at an array of potential policies. According to him, the policies are based on different crypto issues, including initial coin offerings, trading venues, lending platforms, decentralized finance, stable value coins, custody, and ETFs.