Banks have avoided the adoption of Bitcoin for retail customers for a long time. But recently, they have been planning to let their customers carry out transactions with the help of Bitcoin since their customers are investing more money in Kraken, Coinbase, and other crypto exchanges.
In the recent past, small banks like VAST Bank, Quontic Bank, and First Boulevard have participated in crypto activity. In March 2021, Morgan Stanley began offering Bitcoin funds to its clients. Soon after, Goldman Sachs announced its decision to do the same. JPMorgan also began to offer Bitcoin to its wealth-management clients. This move by JPMorgan might cause other banks to introduce crypto trading soon.
Why Were Some Banks Initially Hesitant To Adopt Bitcoin?
Before, Bitcoin users relied on apps like Robinhood, PayPal, Square, or crypto-centric enterprises like Coinbase. Things like risk aversion and compliance were the main factors holding banks back from adopting cryptocurrencies.
Moreover, as the Boston Consulting Group has said, many people were skeptical about the value of cryptocurrency, as there have been instances where individual cryptocurrencies have lost market capitalization. They also experienced volatility during the pandemic, and the Twitter hack of July 2021 ruined their reputation.
Many banks believed that they could not compete with Coinbase’s robust retail customer or product experience. So, they began focusing on asset management and private client areas of their business. But they were mistaken in thinking so because they were unaware of the consumers’ interest in offering cryptocurrency services from their banks.
According to the results of a survey in December 2020, out of 3,898 US consumers from Cornerstone Advisors, 68% of crypto owners showed interest in Bitcoin-based debit or credit card rewards. Among people willing to purchase crypto in 2021, about 4 in 10 were eager to earn Bitcoin-based rewards.
What Will Happen After Banks Adopt Bitcoin?
Once banks adopt Bitcoin, NYDIG will manage Bitcoin custody and trade execution. On the other hand, Fidelity National Information will deal with the link to lenders. There will be disclosures stating that it is NYDIG, i.e. not the bank’s responsibility for handling the Bitcoin. Besides, the cryptocurrency will not be FDIC-insured.
Banks will decide how much they would charge their clients for Bitcoin trades. NYDIG will also introduce other services once it has rolled out the original Bitcoin product. These services would include debit card rewards paid in Bitcoin, an FDIC-insured bank account paying interest in Bitcoin, and so on.
More people will start using Bitcoin if they are allowed to do so through their existing banks. This would let them get a comprehensive view of all their financial assets. They also won’t have to sign up with any other financial institution to carry out Bitcoin transactions.
The Upcoming Bank-Bitcoin Boom Of 2022
In 2022, some forces will mobilize the banking industry resulting in a bank-Bitcoin boom. One of these driving forces behind the boom will be the launch of crypto offerings by big financial institutions. The immense success of PayPal and Square in the sphere of cryptocurrency will be another important factor. Consumer interest and demand, along with regulatory guidance and easing, will also further pave the way for the boom.