The Bank-Bitcoin Boom

Is a Bank-Bitcoin Boom on the horizon? We think so, and here’s why: 

Just last week, we pointed to this year’s uptick in institutional crypto offerings, and the banks are following suit right on cue. 

While all eyes have been on large banks, smaller banks began adopting crypto-friendly policies as early as December of 2020 when New York’s Quontic Bank launched a bitcoin rewards program that pays checking account holders 1.5% in bitcoin on purchases made with the account’s debit card.

Quontic was an early adopter, but it isn’t alone. In January of 2021, VAST Bank became the first nationally chartered financial institution to purchase and provide custody services for a digital asset on behalf of customers and directly from their bank accounts. And a few weeks later, First Boulevard began piloting Visa’s suite of crypto APIs, which enable customers to purchase, custody, and trade digital assets.

Haven’t heard of those banks? Here are a few more recent adopters you will recognize:

In mid-February, Bank of New York Mellon announced its investment in crypto startup Fireblocks, which builds tools for the secure storage and transfer of bitcoin and other cryptocurrencies. Fireblocks will provide the necessary technology for BNY Mellon to act as a custodian for digital assets on behalf of institutional investors.

Morgan Stanley is also gearing up to offer its wealthy clients access to three funds that enable Bitcoin ownership. The announcement came with the caveat that access would be limited to clients with aggressive risk tolerance and at least $2M held in the firm, but the move remains a step towards wider adoption among banks.

Not to be left behind, less than two weeks after Morgan Stanley revealed its Bitcoin-friendly funds, Goldman Sachs announced its own plans to offer Bitcoin exposure to clients in its private wealth management division beginning in the second quarter.

According to Mary Rich, who was recently named global head of digital assets for Goldman’s private wealth management division, “There’s a contingent of clients who are looking to this asset as a hedge against inflation, and the macro backdrop over the past year has certainly played into that… There is also a large contingent of clients who feel like we’re sitting at the dawn of a new Internet in some ways and are looking for ways to participate in this space.”

And the list keeps growing. This week two of the five largest banks in the country announced their own crypto adoption plans:

JPMorgan Chase & Co., which agreed last year to take on crypto exchanges Coinbase and Gemini as banking clients, announced this past week that it will offer a bitcoin fund to wealthy clients as soon as summer.

And on Tuesday, US Bank announced its plans to offer crypto custody services. In an interview about the move, Chief Global Strategy Officer Christine Waldron declared, “I am proud of how we came together from all areas of banking and brought forward our best thinking across our digital capabilities, product development, and technology to drive innovation in our blockchain and cryptocurrency practice.”

That’s five major banking institutions and another three minor ones who are making moves towards crypto adoption. As large institutions continue to expand their crypto offerings and consumer demand rises, expect to see those numbers grow.