Standard Chartered, Citi and UBS are among the 100 biggest banks in the world investing in crypto and blockchain with custodial services leading the charge
- More than half of the 100 largest banks in the world are investing in vital crypto and blockchain-based companies or projects.
- Standard Chartered has invested $380 million so far, followed by BNY Mellon at $321 million, and Citi at $279 million.
- Banks are actively trying to get a foothold in cryptocurrency projects that intend to upgrade the conventional banking system by close-knit integration.
- The demand for custodian services for digital assets is consistently rising, and the banks are most suited to take advantage.
AdvertisementGovernments may not have made up their minds about cryptocurrencies, central banks may still be uncertain but private banking majors are doubling down on blockchain technology.
If we talk about cryptocurrencies and blockchain, Bitcoin is probably the first thing that comes to mind. It has skyrocketed in value over the last few years, and new cryptocurrencies are entering the space almost every day.
And, while Bitcoin is the largest by market value — can be used to buy something in a country like El Salvador and investors treat it like an asset — the underlying blockchain technology is what is powering the financial revolution in the conventional banking sector.
According to a report by Blockdata, more than half of the 100 largest banks by assets under management (AUM) are investing in vital crypto and blockchain-based companies or projects. These investments are complicated — some of them are done directly, some via subsidiaries, and some even via partnerships.
Source: Blockdata Research (July 2021)
|Company||Number of investments||Total size of funding|
|Standard Chartered||6||$380 million|
|BNY Mellon||5||$321 million|
|BNP Paribas||9||$236 million|
|Morgan Stanley||3||$234 million|
|JPMorgan Chase||8||$206 million|
|Goldman Sachs||8||$204 million|
Standard Chartered has invested $380 million so far, followed by BNY Mellon at $321 million, and Citi at $279 million. The list further includes a-list names such as BNP Paribas, Morgan Stanley, Goldman Sachs, and Nomura.
Banks are actively trying to get a foothold in cryptocurrency projects that intend to upgrade the conventional banking system by close-knit integration. Standard Chartered has invested in Ripple, a blockchain-enabled payment settlement provider known for its quick and affordable transfers. Bank of America and American Express are already some of its largest customers, and the list will undoubtedly expand.
This year, America's oldest bank, BNY Mellon, started offering custodian services and has strategic investments in Fireblocks, a digital assets infrastructure provider. Fireblocks offers financial institutions an inclusive platform that can enable a digital assets business, providing a foundation to store, transfer and issue them.
Banks are now betting high on custodial services
The demand for custodial services for digital assets is consistently rising, and the banks are most suited to take advantage.
Banking institutions have offered custodial services for a long time and it includes — gold or cash deposits, DEMAT accounts, and management of other securities. Similarly, a secure wallet is required to store crypto assets, and these can be safely handed over by the user for safekeeping.
Crypto exchanges still aren't regulated and are based out of obscure or even non-existent offices. Amid the uncertainty, investors and regulators are eyeing a more trustable institution that's already knee-deep in the game.
South Korea is among the first countries to release regulations for crypto-assets and their trade. In a bid to crackdown on money laundering and illegal transactions, banks have been tasked with ensuring real-name accounts and extending custodial services in partnership with crypto exchanges.
Eyeing a similar opportunity in the future, banks globally have doubled down on their investment and are actively seeking new projects that can further help adopt blockchain technology.
Simply put, more people would own bitcoin if they could do so through their existing banks, according to a survey commissioned by NYDIG.
According to a report by Indian IT giant TCS, "The broad acceptance of these assets across institutional and retail investors can lead to crypto custody services gaining ground as a mandatory offering from banks, in their attempt to retain customers and increase the share of wallet."
HQLAx, a Luxembourg based startup, leads the collateral management space and has received funding from BNY Mellon, Citi, BNP Paribas, JP Morgan, Goldman Sachs, ING, and more. They are expected to connect to the HQLAx platform to improve liquidity management and execution of live collateral swaps.
Big banks were initially highly sceptical about crypto-based assets, and many weren't shy to show their disapproval. However, that has now changed as they realize the ice shall continue to melt, with or without them. They can either find a haven by accepting blockchain as an integral part of their operations or slowly go extinct like the dinosaurs.
For a more in-depth discussion, come on over to Business Insider Cryptosphere — a forum where users can deep dive into all things crypto, engage in interesting discussions and stay ahead of the curve.
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