Despite the initial skepticism about Bitcoin in the banking industry, most financial institutions just can’t brush off the crypto economy’s rapid growth and enormous potential. Not participating in it means lagging behind and losing new revenue streams. So, the banks have focused on crypto custody as their main area of interest. Almost a quarter of the 100 top-rated banks are working on creating their own crypto custody platforms, or they support companies offering custodial services for cryptocurrency.
As of now, the total value of the cryptocurrency market has exceeded the dizzying mark of $2 trillion, and the big players among financial institutions have decided not to miss the opportunity to grab a piece of it. So far, 13 of the world’s largest banks have invested around $3 billion into funding companies dealing with cryptocurrency and blockchain, according to the Blockdata report. And 42 other banks out of the top 100 banks by assets under management (AUM) followed their suit.
However, it’s hard to say precisely how much money each of the banks has invested since they do it in funding rounds and there are other investors involved. But the valuations of the rounds they took part in can be used as an indicator for figuring out the amount. Based on this information, Standard Chartered, BNY Mellon, Citigroup, UBS Group, and BNP Paribas have been the most active in the biggest funding rounds. Since the total funding figures from all members of the banking sector have already doubled the number recorded in 2020, this trend is likely to grow.
The rationale behind such intensive actions was pretty clear and was driven by several factors:
- Noticing how the value of many banks pales in comparison with cryptocurrency exchanges in terms of the ratio of profitability to the number of employees. Just to give you an example: in 2018, Binance, the leading exchange at the time, with only 200 employees, earned $54M more than Deutsche Bank, which had 100k employees. And this year, with just 4% of the number of employees Goldman Sachs has, Coinbase has beaten the 13th biggest bank globally in valuation.
- The fact that last year U.S. regulators permitted banks to offer crypto custody solutions.
- Constant requests from banks’ clients to provide Bitcoin-related services.
Bitcoin was actually created to eliminate intermediaries in the value transferring process. So why are those intermediaries back in play? Storing the keys to access their coins in some company is anything but a must for cryptocurrency users. But some of them still choose it, feeling more secure when a company (which can be a bank) relieves them of the necessity of having complete control over their wealth. This is especially relevant for companies or institutional investors that have huge financial assets. And one just can’t help but notice the irony: those who were against cryptocurrency, specifically Bitcoin, from the start have now become its most devoted supporters.