Are banks against crypto?
The relationship between banks and crypto is more nuanced and evolving, with various factors influencing their stances:
Concerns and Challenges:
- Volatility and Risk: Cryptocurrency markets are notoriously volatile, posing potential risks to their stability and reputation. Banks are obligated to prioritize financial stability and risk management, making them cautious about directly integrating crypto assets.
- Regulation and AML/KYC: The regulatory landscape surrounding crypto is still evolving, creating uncertainty for banks operating within strict compliance frameworks. Additionally, concerns about Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance with anonymous crypto transactions further add to the hesitation.
- Technological Integration: Integrating crypto technologies with existing banking infrastructure requires significant technological development and investment. This, coupled with concerns about the scalability and security of certain blockchain networks, creates a hurdle for banks considering full-fledged crypto adoption.
Can banks benefit from offering crypto?
Banks can reap a number of benefits from offering crypto-related services. Here are some key potential advantages:
1. Increased Revenue Streams:
- Transaction Fees: Banks can earn fees on crypto transactions just like they do with traditional fiat currencies. This can be a significant source of new revenue, especially considering the growing popularity of crypto.
- Custody Services: Banks can offer secure storage solutions for customers' crypto assets, charging fees for this service. This can be particularly attractive to institutional investors who hold large amounts of crypto.
- Investment Products: Banks can develop and sell investment products that are tied to cryptocurrencies, such as ETFs or mutual funds. This can give their customers exposure to the crypto market without the need to directly buy and hold crypto themselves.
2. Enhanced Customer Service:
- Attract New Customers: Offering crypto services can attract a new generation of tech-savvy customers who are interested in digital assets. This can help banks to grow their customer base and market share.
- Retain Existing Customers: By offering crypto services, banks can meet the evolving needs of their existing customers who may be interested in investing in or using cryptocurrencies. This can help to improve customer satisfaction and loyalty.
- Customer Demand: Growing interest in crypto from clients puts pressure on banks to offer some form of access, whether through direct investment services, custody solutions, or crypto-backed financial products.
- Improve Brand Image: By being at the forefront of the crypto revolution, banks can project an image of being innovative and forward-thinking. This can be beneficial for their overall brand reputation.
3. Operational Efficiency:
- Faster and Cheaper Transactions: Blockchain technology can be used to facilitate faster and cheaper cross-border transactions than traditional bank transfers. This can save banks money and improve their customer experience.
- Reduced Fraud: Blockchain technology is inherently secure and transparent, which can help to reduce fraud and money laundering. This can save banks money and protect their customers.
- Streamlined Processes: Blockchain technology can automate many manual processes, such as clearing and settlement, which can save banks time and money.
As the death of the high street bank branch accelerates, major banks will need to take a cautious but optimistic approach to learning more about the benefits of adopting blockchain technology and offering it to their customers.
It is worth noting that there may be many banks around the world that are no pro- or anti-cryptocurrency, and simply waiting to see what happens in regards to the developing regulatory landscape.
Crypto-specific regulations around the world
The state of cryptocurrency regulations around the world is a dynamic and complex landscape, with countries adopting vastly different approaches. Here's a general overview of the current state:
Broad Categories:
- Fully Legal: Countries like Japan and Singapore have established clear regulatory frameworks, recognizing crypto as legal assets and allowing trading through licensed exchanges.
- Partially Banned: Some countries like India have banned crypto trading on domestic platforms but allow holding and trading on foreign platforms.
- Outright Banned: A handful of countries like China have implemented outright bans on crypto trading and mining.
Key Regulatory Areas:
- Exchanges and Trading Platforms: Regulations for crypto exchanges vary widely, with some countries requiring licensing and KYC/AML compliance, while others have no specific regulations.
- Taxes: Crypto taxation also differs significantly, with some countries treating it as income, capital gains, or even commodities.
- Mining: Crypto mining regulations are also diverse, with some countries outright banning it and others placing restrictions on energy consumption.
Examples of Different Approaches:
- United States: The US regulatory environment is still evolving, with the SEC and CFTC taking the lead. Several states have enacted specific crypto regulations, while others have taken a more hands-off approach.
- European Union: The EU is working on a comprehensive crypto regulatory framework known as MiCA, which is expected to come into effect in 2024.
- China: China has implemented a strict ban on crypto trading and mining, citing concerns about financial stability and money laundering.
Challenges and Considerations:
- Lack of Global Standards: The absence of global regulatory standards creates uncertainty and hinders cross-border transactions.
- Innovation vs. Regulation: Balancing innovation in the crypto space with the need for effective regulation remains a challenge.
- Consumer Protection: Protecting consumers from fraud and scams within the crypto market is a crucial aspect of regulation.
Overall, the state of cryptocurrency regulations is constantly evolving, with different countries adopting varying approaches. While some countries have embraced crypto, others remain cautious or skeptical. As the crypto market matures and gains wider adoption, we can expect to see further developments in the regulatory landscape.
For specific details on the regulatory situation in a particular country, it's best to consult with local experts or legal professionals.
The Top Banks Offering Crypto:
Some major names in the space have begun to offer crypto services to verified users, and we’ll give an overview of what they offer below. Note: these are not in order of who is better, they all have pros and cons.
Revolut
Revolut offers users the ability to purchase and hold over 120 tokens in its custodial wallet, with external withdrawals to other crypto wallets enabled for over 30. They store your crypto in cold, offline wallets and also offer the ability to earn some cryptos through learning exercises. Members of premium Revolut plans can secure trading discounts.
Goldman Sachs
Global investment bank Goldman Sachs not only invests large amounts of capital into the cryptocurrency space, it also publishes detailed research about this exciting new asset class.
Monzo
Digital challenges bank Monzo has become something of a household name in the UK, and is unusual in that it will not penalize or block transactions to and from crypto exchanges such as Coinbase. Unlike Revolut, which is also available in the UK, it does not offer the ability to directly purchase or store cryptocurrencies.
RBS
The Royal Bank of Scotland does not offer crypto directly, but has no problem with its customers using cryptocurrency payments and services. The caveat here is that the institutions RBS customers purchase crypto from or interact with must be FCA-Regulated.
Nationwide
Nationwide, like RBS, has published content about its concerns around cryptocurrency scams and other risks, but will not prevent its customers from interacting with or purchasing from Cryptocurrency exchanges. Nationwide’s caveat is that the transaction volumes should be under £5000 or $6000 per day. They do not support purchasing via credit card.
Natwest
Natwest takes its concerns further than RBS and Nationwide, not only publishing content about scams, but actively restricting payments related to cryptocurrency, relegating customers to £1000 a day or a £5000 dollar limit.
The Bottom Bank: Chase
Chase, JPMorgan’s digital bank in the UK, in September 2023 moved to block payments to and from crypto banks, making it the least friendly! In an FAQ on the topic, they state that whilst they regularly review their policies, they can’t guarantee this one will ever change…
Summary at the end of - if you use a bank to buy crypto it may be more convenient but you are typically paying a lot more for the assets- or a far higher percentage in fees, so, you’d be better signing up with a crypto exchange directly if you want to take it seriously (and not overspend). That said, if you’re in it to dabble and don’t want to have extra work these are a good turnkey solution.
