Reports that outdated banks such as BNY Mellon and Deutsche Bank have become active in the cryptocurrency area, including through deposit services, should be welcome news for crypto investors.
After all, lost or misplaced private keys are the curse of the cryptocurrency world – just remember the Welshman who lost 7,500 bitcoins (BTC), which is worth around $ 400 million today, when he filled up his computer’s hard drive and forgot that it was just a depot. … His private key. Meanwhile, traditional banks are primarily stewards of society, so perhaps they can improve their interaction with the cryptocurrency if at least the private keys.
But if large financial institutions are already meddling in cryptocurrencies – and not just in storage, as investment bank Morgan Stanley pointed out on February 13 for future investments in bitcoin – why now? Is it just an increase in bitcoin prices? Or has the groundbreaking blockchain / cryptocurrency industry taken to the next level, with even cautious depository institutions accepting it?
It looks like a combination of factors. In the summer of 2020, the office of the U.S. auditor issued a cover letter that allowed banks to protect their customers’ digital assets, “including keeping unique cryptographic keys associated with cryptocurrencies.” This has resulted in “a significant increase in demand and direct inquiries from banks,” Pete Najarian, CFO of BitGo, cryptocurrency manager, told Cointelegraph.
Meanwhile, the recent boom in the cryptocurrency markets has attracted more traditional large investors who expect an institutional level of security for their digital assets. “There is a real demand from end users, and this is forcing the old infrastructure to participate in these markets,” Najaryan added.
Nigel Greene, founder and CEO of Devere Group, an independent financial advisory firm, said that current interest from banks is driven by three main factors. “The first is to meet the demand from institutional customers,” he told the Cointelegraph. Second, it is becoming increasingly clear that cryptocurrencies are the future of money; The third is the fear of being lost or abandoned. ”
Tobias Tenner, deputy director and head of digitization at the German Banking Association, told Cointelegraph that the bitcoin price increase has captured the interest of German banks, and the new regulations introduced in January 2020 that paved the way for banks to operate. Crypto Trustees. “Banks [soon] will be able to offer custody, trading and possibly advisory services,” he said.
Are the banks ready for this challenge?
But are traditional banks really ready to handle cryptocurrencies? Will they be able to cope with instability, hackers and advanced technology? Pablo Agnese, associate professor at the Department of Economics and Business Organization at UIC Barcelona, told the Cointelegraph: “I think they [the banks] are learning and trying to find their role in this brave new world. However, history shows that the traditional banking sector is not a specific sector. One is vulnerable to major technological breakthroughs. ”
Brian Rutledge, assistant professor of economics at Carnegie Mellon University, told the Cointelegraph that cryptocurrency storage is not much different from what the old banks are doing now and have been doing for years. Having a public / private key pair is important, but “not that difficult” or should not be for most banks.
Older organizations will also face a threat to their business reputation if they go into cryptography, which can comfort new users who may be worried about taking a dip in the cryptographic waters. Can banks deal with this problem? Perrian Boring, founder and president of the Digital Chamber of Commerce, told the Cointelegraph: “Absolutely true”:
“As more and more companies and organizations add cryptocurrency to their balance sheets, the demand for highly reliable storage services increases. Large owners need reliable solutions for storing cryptocurrencies with multiple authentications, and traditional banks are well positioned to offer these solutions. ”
Are banks the “white card” for their services?
If so, can this happen at the expense of cryptocurrency-focused companies like BitGo or cryptocurrency exchange platforms like Gemini that also offer storage services? “We believe there is room for both traditional financial services companies and original crypto companies,” said BitGos Najaryan, who sees new opportunities to partner with traditional banks.