Banks cautious on Crypto
Banks looking to expand into the wild world of Crypto got a pointed reminder from regulators this month of the risks involved.
The Basel Committee on Banking Supervision announced on June 10 that any bank that wishes to store Bitcoin, among other crypto goods, will be subjected to the strictest capital requirements. According to the standard setters, banks expanding their products in the unpredictable market would pose significant dangers to financial stability.
According to a Bloomberg review of some of the world’s largest banks’ products, more lenders are considering how they may widen their offerings this year, even as caution remains the watchword. While a few have begun to clear crypto futures, the majority have mostly avoided other providers.
Banks have been quicker to adopt the underlying technology that supports digital assets. JPMorgan has long been a supporter of Ethereum, the world’s most popular blockchain, which employs smart contracts to perform blockchain-based operations that are impossible to achieve with Bitcoin.
JPMorgan, for example, is utilizing its private version of Ethereum to perform overnight repurchase agreements in which digitized US Treasury bonds are exchanged for JPM Coin, the bank’s digital currency. It claims to do more than $1 billion in such transactions per day.
There is still no agreement on the optimum strategy to provide exposure to crypto-assets. Jamie Dimon, the CEO of JPMorgan Chase, stated during a congressional hearing earlier this month that his bank does not instruct its customers what to do with their money, but he stressed the significance of caution.
Danske Bank’s cautious on Crypto
On June 17, Danske Bank, Denmark’s largest bank, published four-point advisory outlining reasons to exercise caution when investing in digital assets.
— CoinMargin (@coinmargin) June 18, 2021
While the bank advised consumers to proceed with caution, it did not take a firm stance against bitcoin. The bank claimed that it would not provide cryptocurrency services to its customers but will not interfere with crypto platform transactions.
The bank also stated that using its credit cards in conjunction with bitcoin trading platforms would not be a problem, given that all anti-money laundering requirements were met. The bank admitted that cryptocurrencies were a “major digital breakthrough in financial services” and that many of its clients were interested in the technology. The bank also commended blockchain technology’s promise but concluded by laying out four reasons to be careful when dealing with cryptocurrencies.
When dealing with financial wrongdoing in the crypto area, the bank noted a lack of openness. It also cited a lack of regulation and consumer protection measures and the unpredictable nature of bitcoin prices and the environmental impact of a technology that demands “very high computing power.”