In 2017, when Bitcoin (BTC) began to attract the attention of players in the traditional financial industry and mainstream economic media, opinions on cryptocurrency were generally negative. CEO Jp morgan, Jamie Dimonfor example, did not skimp on words and called bitcoin a scam.
Four years later, Wall Street’s historic institutions changed their stance radically: Goldman Sachs will offer its clients Bitcoin investment instruments in the second quarter of this year. From my side Bank of New York Mellon announced its plans to hold cryptoassets on behalf of its clients as JP Morgan recently made some very positive comments about Ethereum (ETH).
This movement was initiated by payment giants such as PayPal, Visa or Master card each of which has developed offerings and infrastructure for cryptocurrencies.
On the other side of the Atlantic, banks seem to be tightening. In France, the French Federation of Banks reportedly declined to join the findings of the report of a working group that included representatives from banks, regulators and crypto companies. According to this tweet from Claire Balva, blockchain and crypto manager at KPMG in FranceFrench crypto companies face many difficulties in opening bank accounts.
Hi @BrunoLeMaire, French # crypto companies still can’t have a franc bank account … https://t.co/b0fy5mgrFF
The situation seems similar in the United Kingdom: Many commercial banks have chosen to deny access to bank accounts to institutional clients engaged in Bitcoin and crypto-asset related activities such as certain PSANs (Digital Asset Service Providers).
Why is this reluctance? Banks consider the risks associated with cryptoassets too high. Indeed, fraudulent cryptocurrency transactions are difficult to detect and impossible to reverse. The steps to be taken to ensure compliance represent a significant additional financial burden on banks. In these circumstances, rather than interacting with companies and individuals dealing with these assets, banks prefer to limit their interactions with this sector.
Refuse to participate
However, the benefits of using blockchain are too great to be ignored. Many banks have started to develop their own blockchain-based programs. Societe Generale For example, it is collaborating with Tezos on its first structured security token product.
It is useful to highlight the recent example of South Korea. The country regularly makes headlines as its regulators spearhead one of the toughest crackdowns in the industry. The new rules require users to open accounts, linked to their names and verified by social security numbers, with commercial banks, contractually linked to exchanges, over a rolling six-month period. This measure had a positive impact on banks: in recent months, the number of account openings in commercial banks has sharply increased.
The adoption of bitcoins by banks will be a huge boost for the widespread adoption of cryptocurrencies. But some are worried about the new risks that the participation of banks in the industry could create: for example, there is the possibility of a new form of centralization associated with the creation of services by banks for the storage of cryptoassets. Others like Campbell Adams, founder Clean digital marketsbelieve that these fears are irrelevant: Campbell points out that this is a distant risk, and argues that,
“A banking-grade infrastructure that meets regulatory requirements will ensure levels of stability and security are much higher than those currently in use.”
Banking cooperation is critical to creating access ramps between fiat currencies and cryptocurrencies. Without their participation, the general public will continue to view the crypto industry as an unusual (and questionable) part of the financial industry. And this participation will also have positive results for traditional commercial banks as they generate higher profits through the integration of new blockchain-based revenue models.
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