The world has been quick to realize the avant-garde and empowering potential of digital currencies and assets in the last few years, and correspondingly made moves to adopt it as a tool towards financial freedom and unprecedented transparency. As FinTechs, venture capital funds, investors, and even the general public at large are showing keen interest in crypto, financial institutions can no longer afford to overlook the efficiency and potential of crypto assets; one that comes with a widely held commitment and belief that cryptocurrencies will be an important block in building the future of money.
While financial institutions have been swinging hot and cold on crypto offerings, keeping in line with the uncertain regulatory stance, not much can stop them from experimenting and implementing these technologies in their operational models or investing in startups that are doing so. With this piece, we take a look at what some of the financial services big-shots are doing when it comes to crypto, and how committed they really are to the cause.
Even though the notion of banks becoming crypto-curious stems as far back as 2012, it’s only recently that financial institutions have begun to build around the decentralized ecosystem. Many of the notable industry names have so far made progress in investing both in DeFi startups and in crypto-assets such as cryptocurrencies, NFTs, stablecoin, etc.
Last year, Wall Street mega-bank JP Morgan Chase took an interest in blockchain infrastructure startup Bloackdaemon, which helps connect commercial stakeholders for node management. On similar lines was Morgan Stanley’s $48M investment in blockchain startup Securitize, a platform that enables investors to buy and sell shares of closely held assets; and Mastercard’s crypto-capabilities strengthening agreement to acquire crypto-intel startup CipherTrace. Many other banks have made their own move towards taking a stake in DeFi startups, including the names of British multinational bank Standard Chartered, American investment bank Goldman Sachs, and French financial services company BNP Paribas.
Amongst those who took a plunge at investing in crypto assets, few significant cases of payments giant Visa, Spanish digital bank BBVA, and New York-based Citibank come out on the top. Besides partnering with over 60 crypto platforms to enable awareness and use of digital assets for payments, Visa also purchased its first non-fungible token (NFT) in the form of digital artwork CryptoPunk.
Several banks have set up dedicated teams for digital assets and blockchain, thus joining the talent wars with DeFi platforms, and also to address their own version of FOMO (fear of missing out). In October 2020, JPMorgan created a new unit called Onyx with over 100 staff members to focus on blockchain projects and digital assets. In 2021, both Goldman Sachs and Citi launched their Digital Assets Group, a unit that will help provide crypto services to all its wealth management customers. In September 2021, Standard Chartered also unveiled its plans to set up a digital assets team in Singapore. A slew of big banks in the USA, Europe, and the UK have been following suit by setting up dedicated divisions for blockchain and digital assets.
Apart from these initiatives, several banks have also extended their arm towards offering crypto trading for their clients. Goldman Sachs, Morgan Stanley, BNP Paribas, JP Morgan Chase, and BBVA account for some of those who have availed this feature in a bid to expand their crypto products portfolio.
A handful of financial institutions went a step further in making crypto an accessible entity through their existing frameworks.
Citi joined the cryptocurrency hype via the completion of a proof-of-concept project with the Inter-American Development Bank (IDB). The pilot program used the LACChain Blockchain Network to successfully send payments from IDB’s Washington headquarters, to a recipient in the Dominican Republic. But Citibank wasn’t the first to have achieved this revolutionary triumph.
In 2016, British investment bank Barclays was reported to have made the world’s first trade transaction using blockchain technology set up by Wave – a $100K worth cheese and butter export deal that was executed through partnership with Israel startup Ornua. Since then, several banks have made their own successful blockchain transactions, such as Standard Chartered’s recent first cross-border live transaction on blockchain-enabled trading platform Trusple.
Nonetheless, not many of these traditional players have furthered their blockchain efforts when it comes to developing their own stablecoins – except JPMorgan Chase, who launched its JPM Coin with the belief that blockchain is really profitable. The stablecoin can currently be used in commercial transactions, but is not yet available to retail customers.
Apart from the regular buying, selling and holding of cryptocurrencies, certain traditional firms also offer ancillary crypto services, and have their own internal divisions and teams to continue broadening on awareness and innovative blockchain solutions.
Goldman Sachs’ 2021 internal memo revealed the re-establishment of its cryptocurrency desk that exists within the bank’s global currencies and emerging markets trading division. It also launched a new software platform that will help provide the latest cryptocurrency news and prices to its clients.
Mastercard followed suit with its Start Path global program, a startup engagement project that gives access to insights, tools, and partnership opportunities pertaining to digital asset technologies.
Amongst other financial services providers who were eager to retain customers through their crypto offerings, Visa’s introduction of its Global Crypto Advisory Practice in an attempt to explore the crypto-roadmap strategy and BNP Paribas Securities Services’ partnership with Israeli startup Curv to finalize its pilot transfer of security tokens certainly take the cake.
Crypto’s injection in the financial marketplaces is painting a picture through the colors of modernization and novelty. It serves as an alternative tool to attract the attention of more newcomers into the space, as well as clear the path for a more financially inclusive environment. Although this drift comes with hurdles across diverse verticals such as regulation and data privacy, the DeFi landscape with its innovative breakthroughs of NFTs and non-custodial wallets will cater to the emerging tech-savvy generations.