If you’re a watcher of financial markets, then you won’t have had much difficulty noticing that the path trodden by cryptocurrency in 2022 has been a testament to its volatility. If you were to make a Bitcoin word cloud for the first half of this year, the word “Crash” would likely be prominent within it. For some sceptics, this has been the perfect year so far to loudly crow that they were right about digital coins all along. But one group of individuals that isn’t joining in is the banking community. That should be enough to make anyone pause for a moment.
If Bitcoin and all other cryptocurrencies were, to use a metaphor, circling the drain, then surely banks would be pulling away from the entire area. Yet, since the beginning of the year and in recent weeks, let alone months, conventional banks have been investing time, money and effort in cryptos. So they must have a reason for this interest: it simply wouldn’t make sense for them to take big risks against a backdrop of financial uncertainty such as the one we’re seeing globally. What is causing the banks to take bold action in the crypto world?
It’s a way of retaining talent
Many people feel that cryptocurrency is experiencing some bumps now because of its relative youth as a financial asset class, and when it comes out of this spell it will be more dynamic as a result. This makes it attractive for particularly the younger heads on Wall Street, who are interested in making moves in a growing market. They could head up a startup of their own, or the banks could place them in a crypto project that they feel has the potential to fuse the newness of digital currency with the experience only a top bank can bring. So setting up in the crypto sphere is a way of keeping promising people around.
It’s a chance to shape the future
From sending money to people under oppressive regimes to placing bets at a crypto casino, the versatility of cryptocurrency is a benefit that banks recognise. That versatility could be left in the hands of others, or the banks could play a part in making it work for them. It’s hardly a surprise that the names and institutions that have been so dominant in finance would want to have a stake in deciding the direction of a newer asset class. There’s no guarantee it will work the way they expect it to, of course – Bitcoin and co. have got this far without centralised finance – but banks are always going to want a piece of the action.
They’re going where customers are
Banks don’t become large financial institutions by ignoring what customers are doing, and when a bank sees that thousands of its customers are moving money to crypto exchanges, it’s a no-brainer for the bank to explore that field. For some customers, the first time they have ever invested in a meaningful sense will come via the crypto sphere – so it makes sense for banks to offer them the opportunity to invest in a guided way. Offering a way into crypto to their existing customers represents the chance for banks to gain a real foothold in the crypto world. They can either see crypto as competition or another vertical, and it makes sense to take the latter approach.