Why Are Banks Now Entering the Crypto Industry?

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Cryptocurrencies are becoming more popular than ever, which means they’re changing the way many people invest. People of all professions can now use crypto to save for their future goals without worrying about high fees associated with other financial instruments. Some of these investments include stocks or bonds, which charge substantial commissions. 

However, many large companies haven’t paid much attention to crypto, while others dismissed it as a fad. These billion dollar companies have historically been hesitant to invest because of the perceived risks involved. But, things are beginning to change, and because of those changes, some large banking institutions are now allowing investors to hold their crypto assets alongside their fiat accounts.

So, this begs the question —  What is the difference between holding your crypto in a bank account and an established digital currency provider? Today, we will discuss the basics of cryptocurrency and why major banks are moving forward with this landmark change. 

What is Crypto, and How Has it Changed?

Cryptocurrencies are virtual or digital currencies that do not have a physical form. Instead of being supported by governments, they reside within decentralised networks using blockchain technology. 

Cryptos are secured by cryptography, using encrypted data to ensure malicious actors cannot hack into networks, steal from others, or replicate the currencies. 

In the past few years, some of the most significant and most influential companies in the world have been scrambling to hire cryptocurrency experts to learn about this booming market and get in on the action. Businesses are gaining confidence in their investments with crypto, and it is something Australian business owners should consider adding to their strategic outlook too.

How Are Banks Getting Involved With Crypto?

Since crypto is becoming more popular and more stable, large banks are deciding they’re missing out on a significant opportunity. Crypto has become its own sector of the economy. 

Large banks, including Chase, JP Morgan, Goldman Sachs, and Wells Fargo have hired or are currently hiring employees to focus solely on cryptocurrency, so that they can get in on the investing and trading of crypto, seeing the market as a desirable source of revenue for the first time.

Banks have added over 1,000 new cryptocurrency positions since 2018. There’s been a 250% increase in these roles across Wall Street in the past three years alone. The majority of these employees come from banking industries and financial services. 

Benefits for Banks That Choose to Work with Crypto.

1. Financial Gains

Banks choose new investments based on the potential to have significant financial gains. For a long time, banks dismissed crypto as a fad. But more recently, major players are taking notice, having learned that it’s a legitimate financial opportunity they can’t afford to pass up. Crypto has become its own economic sector, making it a huge investment opportunity for Wall Street.

An unexplored area with potential financial upside is trading cryptocurrency, hence large companies are also hiring traders citing the potential revenue generated when helping people trade cryptocurrencies. Some of the biggest cryptocurrency platforms, such as Gemini and Coinbase, were formed with crypto as a central aspect and have since established themselves as the most trusted institutions in the industry globally. Other platforms, such as Robinhood which focus on traditional finance, allow people to trade crypto and other assets, which gives customers more options. 

Large banks such as JP Morgan haven’t incorporated crypto trading except crypto ETF’s, which are based on crypto futures. Over time we expect the profits in allowing clients to trade these markets directly to be a main driver in increased adoption by these larger institutions, in a recent example, CBA has announced it will allow crypto trading on its banking app.

2. Banks Have A Reputation of Trust

People also trust banks, with 99% of Australian households holding a bank account. Banks are long-lived institutions that have a reputation of protecting the average Australian’s savings. It’s no secret that major financial institutions like these see the opportunity to upsell crypto investments as a lucrative one, publicly legitimising crypto investment on a whole new level. 

3. Banks Will Make Their Platform a One-Stop-Shop

Banks will establish crypto wealth management and savings platforms. They will bring service products to companies going to the market faster and faster as banks adapt and enhance their services. 

In the past, Bitcoin adopters have had to use apps from fintech players like Robinhood, payment services like Square and PayPal, or crypto-centric companies like Coinbase. Banks adopting crypto services seek to eliminate these intermediaries from the equation and make handling your crypto much akin to the way you handle your regular banking services. 

Some credit and debit card companies also don’t allow you to use them to purchase crypto. This has been frustrating for many customers over the years, and some have elected to invest directly through their bank account. With banks adding crypto services, it is likely that we will see these trends change over time. 

Should You Invest in Crypto With Banks?

Although banks have announced that they will incorporate crypto options into their services, the consensus on how it will work and how stable it will be is unclear.

Commonwealth Bank associates its brand with stability, values and trust. It has become one of the first central banks to dive into the world of crypto. While representatives from the bank have said they are confident about adding themselves to the market, they are late to the game. 

Many regulators are sceptical at the idea of banks taking on crypto. The security is questionable. They are not established in the field, whereas companies that specialise in crypto have proven their security and longevity.

Following this theme, there is also an expectation that banks will move slower on some of the most innovative digital asset applications, restricting the potential for individuals who decide to store cryptocurrency value with banks to benefit from many of the newest and asymmetric opportunities, such as DeFi and NFTs.

Aus Merchant – Your Trusted Crypto Broker

Does the idea of investing in cryptocurrency sound appealing to you, now that you know how many major institutions back the platform? Knowing that trusted companies like Tesla, JP Morgan and Fidelity Investments are backing the idea gives any customer peace of mind, especially customers debating whether investing is worth the financial risk. 

We’re here to tell you that any investment is a risk, but investing in cryptocurrency is an opportunity you shouldn’t let pass you by. At Aus Merchant, we can help you take your first steps into cryptocurrency buying, trading and selling. We are regulated by the AUSTRAC, and our team can help prevent the use of cryptocurrency in illegal activities. We can protect you and your investment every step of the way. 

Contact us here today. We aim to get back to every potential customer within one business day. Let us help you get started on your cryptocurrency journey and see your investments thrive.

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Mitchell Travers

Mitchell Travers