The cryptocurrency view of the five major U.S. banks: Issuance, investment, and transaction are all involved

On July 16, 2021, Bank of America, the second largest bank in the United States, approved the trading of Bitcoin futures for some customers. Bank of America has always been very conservative in the crypto industry. Due to the large margins required for the trading of futures services, it is now only allowed to open to some customers.

So far, the top 5 U.S. banks (JP Morgan Chase, Bank of America, Citibank, Wells Fargo, Goldman Sachs) have all set foot in the crypto asset market:

In March 2021, JPMorgan Chase applied to the SEC (US Securities and Exchange Commission) to launch an encrypted digital fund to diversify the client’s asset portfolio;

On July 2, 2021, Citigroup established an encrypted asset department, which will be dedicated to the business of cryptocurrency and blockchain;

On May 20, 2021, Wells Fargo announced that it will provide clients with cryptocurrency investment strategies;

In May 2021, after a three-year suspension of the plan, Goldman Sachs restarted its cryptocurrency trading desk.

The cryptocurrency view of the five major U.S. banks: Issuance, investment, and transaction are all involved

The top five U.S. banks and their assets

Although the five major U.S. banks have provided customers with services related to cryptocurrency transactions, the traditional U.S. banking sector has tended to be conservative and even critical of crypto assets. As the demand for the cryptocurrency market continues to grow, traditional banks’ criticism of cryptocurrency has gradually weakened: some banks maintain a neutral opinion, while Goldman Sachs and others have changed their views and are optimistic about the long-term development of cryptocurrencies.

JP Morgan Chase: Issuing JP Morgan coins, but not optimistic about Bitcoin

The CEO of JP Morgan Chase, Jamie Dimon (Jamie Dimon) has repeatedly criticized and disliked the development of Bitcoin in public. On September 13, 2017, Dimon criticized Bitcoin at an event organized by Barclays Bank, declaring that it was a “fraudulent” activity and saying that he would fire traders who were found to be trading cryptocurrencies. At the hearing of the US Congressional Financial Services Committee on May 27, 2021, he still advised people to avoid and stay away from Bitcoin and cryptocurrencies in general.

Despite this, JP Morgan Chase is still actively deploying the blockchain and cryptocurrency track. In February 2019, JPMorgan Chase announced that it will become the first major U.S. bank to independently develop cryptocurrencies and issue JPM Coin (JPM Coin, a stable currency pegged to the U.S. dollar). The cryptocurrency can instantly complete payment and settlement between JPMorgan Bank customers. JPMorgan coins can only be exchanged within JPMorgan Chase Bank and cannot be traded in the market.

JPMorgan Bank officially launched JPMorgan coins in October 2020. However, this news has since been overshadowed by the cryptocurrency bull market, and there are few news reports about Morgan Coin. JPMorgan coins are now mainly used to provide securities settlement services for JPMorgan Chase’s customer base.

Beginning in April 2021, JPMorgan Chase will provide wealthy customers with active Bitcoin management fund services, and NYDIG will serve as the custodian service provider for this fund.

Although JP Morgan Chase offered wealthy customers Bitcoin transactions in April, it still has reservations about cryptocurrencies. On June 24, 2021, JPMorgan Chase released a research report showing that 80% of institutional investors have no willingness to allocate Bitcoin. JPMorgan Chase believes that because the current volatility of Bitcoin and gold is not linked, the price of Bitcoin should be between 23,000-35,000 US dollars. JPMorgan Chase also pointed out: “In the foreseeable future, it is unlikely that the volatility between gold and Bitcoin will fully converge or reach equilibrium.”

JPMorgan Chase also released an investor survey questionnaire, with a sample of about 3,000 US investors from more than 1,500 institutions. Among them, 90% of investors said that their institutions and companies do not invest in crypto assets, and 80% of respondents said they would never enter the cryptocurrency market. Nearly 30% of the survey respondents agreed with the “stock god” Warren Buffett’s view that Bitcoin is a toxic “rat poison”. 80% of the investors surveyed expressed their desire to impose stricter regulatory restrictions on cryptocurrencies. Almost every investor interviewed believes that fraud in this area is “somewhat very common.”

Bank of America: Keep a “distance” from Bitcoin and other cryptocurrencies

On February 3, 2018, JPMorgan Chase, Bank of America and Citibank successively interrupted the channels for customers to purchase cryptocurrencies with their credit cards. At the time, they generally believed that the market was very immature and volatile. Bank of America issued a statement at the time: Bank of America customers can freely buy Bitcoin and other cryptocurrencies, but they cannot use the Bank of America platform. Even at that time, Bank of America had applied for and obtained nearly 43 blockchain patents.

Bank of America launched Bitcoin derivatives on its trading platform on July 17, 2021, allowing customers to conduct transactions. Bloomberg reported that the Bank of America established a research group dedicated to cryptocurrency and related technologies as early as 2019 to study cryptocurrency.

At the same time, Bank of America has been committed to blockchain research for many years, and continues to develop related technologies and apply for patents. According to the disclosure of International Strategies, Bank of America has applied for a total of 60 blockchain patents as of July 2020, leading other institutions in the industry.

Despite active research on blockchain technology, Bank of America’s attitude towards cryptocurrency has not changed. In March 2021, Bank of America stated that it “has no reason to support Bitcoin”, believing that it is too speculative. In addition, Bank of America believes that in addition to price fluctuations, Bitcoin’s impact on the ecosystem is also extremely harmful. Bank of America pointed out that the carbon dioxide emissions generated by the verification of bitcoin transactions are about 60 tons, which is equivalent to the emissions of the entire Greece. For every 1 billion U.S. dollars of Bitcoin inflow, it will bring about the equivalent of 1.2 million cars’ carbon dioxide emissions. If the price rises to 1 million U.S. dollars, Bitcoin may surpass Japan and occupy the position of “the world’s fifth largest carbon emitter.”

On April 9, 2021, Bank of America, Citibank and Wells Fargo participated in the hearing of the U.S. Senate Banking Committee and shared their opinions on cryptocurrencies at the meeting.

Bank of America CEO Brian Moynihan stated that Bank of America will continue to “evaluate cryptocurrency-related products and services, risks, and customer needs.” Bank of America still maintains a distance from Bitcoin and other cryptocurrencies.

He emphasized, “We have not found a large-scale blockchain case.” Bank of America said: Currently, we do not lend to cryptocurrencies, nor do we provide companies whose main business is cryptocurrency or simplifying cryptocurrency transactions and investments. Banking services.

Citibank: Always remain “cautious” on cryptocurrencies

Citibank is a traditional bank that is relatively neutral to cryptocurrencies. On July 8, 2015, it was reported that it was developing its own Citicoin, but the project died in 2019. When major banks criticized cryptocurrency, Citibank seldom made comments criticizing cryptocurrency. In the past, Citibank merely prohibited its customers from purchasing cryptocurrencies through their credit cards.

On May 7, 2021, it was reported that Citibank was considering providing cryptocurrency-related services to its customers in response to growing demand, especially from asset management companies and hedge funds. Itay Tuchman, head of global foreign exchange at Citibank, told the Financial Times that the investment bank is already exploring the possibility of providing cryptocurrency services to its customers, but will not rush to launch services that will worry regulators.

He said: “We should not do anything unsafe or unhealthy. When we are confident that we can create products that are beneficial to our customers and can be supported by regulators, we will enter the (cryptocurrency market).”

At the hearing on April 9, 2021, Citibank expressed its caution about encryption. Citibank CEO Jane Fraser stated that as the bank “understands the changes in the field of encrypted assets and the use of distributed ledger technology, customer needs and interests, regulatory developments and technological advancements,” Citibank has adopted “cautious way of doing”.

He also pointed out: “Before we were exposed to cryptocurrency, we believed that it was our responsibility to ensure that we have clear governance and control measures.

Wells Fargo: Cryptocurrency is an “investable asset”

On January 17, 2018, Dick Kovacevich, Chairman and CEO of Wells Fargo Bank, said in an interview with “Squawk on the Street” that he believes that Bitcoin is a kind of MLM scam, meaningless. And the price of Bitcoin should be lower. According to Coindesk’s data, Bitcoin prices ranged between 4000-8000 from October 2017 to March 2018. Among them, the highest one can reach 18,000 US dollars.

The cryptocurrency view of the five major U.S. banks: Issuance, investment, and transaction are all involved

Bitcoin price trend from 2017/10 to 2018/3, source: Coindesk

In June 2021, Wells Fargo began to provide cryptocurrency financial products to wealthy customers because the company recognized that cryptocurrency is a “viable investable asset”. Wells Fargo believes that cryptocurrency is an evolving asset that can be regarded as an alternative investment. Its different traditional stock and commodity markets may provide attractive hedging opportunities.

In February 2020, Wells Fargo invested US$5 million in British start-up Elliptic, whose main business is to help banks manage risks related to cryptocurrencies. The company is known for its analytical tools and sells these tools to some of the world’s largest cryptocurrency platforms – including Binance and Circle among others – to help them detect and prevent illegal cryptocurrency transactions.

At the hearing on April 9, 2021, Wells Fargo said it would pay close attention to the crypto market. Wells Fargo CEO Charles Scharf said that the company is about to announce a pilot project that uses blockchain technology to “complete internal account book transfers for cross-border payments within our global branch network.” But for cryptocurrency, he said: We will continue and actively pay attention to the development of cryptocurrency as a possible investment product in the future.

Goldman Sachs: The current cryptocurrency has become a new asset class and will continue to exist

On January 23, 2018, Goldman Sachs issued a warning that cryptocurrency is the largest bubble in history, and the bubble of Ether is bigger than that of Bitcoin. Goldman Sachs believes that cryptocurrency has not only surpassed the bubble level of the financial market, but also surpassed the level of the “tulip mania” that occurred between 1634 and early 1637.

The cryptocurrency view of the five major U.S. banks: Issuance, investment, and transaction are all involved

Comparison of Bitcoin and Tulip Mania, source: Bloomberg

Goldman Sachs also stated in a warning to customers: “Although we don’t know whether the price of Bitcoin or other cryptocurrencies will double or reach three times the previous price in the future, we don’t believe in these cryptocurrencies. Currency can maintain its value for a long time.”

However, in March 2021, Goldman Sachs restarted its cryptocurrency trading platform, mainly for high-net-worth customers. Goldman Sachs originally planned to launch the trading platform in 2017, but due to the collapse of the market, the plan was shelved in 2018. Goldman Sachs revealed that institutions are becoming increasingly interested in Bitcoin and therefore decided to restart Bitcoin transaction services.

In May 2021, Goldman Sachs released a report entitled “Cryptocurrency: A New Asset Class?”, which changed its previous pessimism about cryptocurrency as a potential institutional asset class. The financial giant believes that Ethereum may become the dominant blockchain-based encryption technology in the future and have a huge impact on the data economy.

Goldman Sachs discussed the development of cryptocurrency through analysis and interviews with a number of experts. Goldman Sachs emphasized the benefits of blockchain technology in the report, and paid special attention to Ethereum-based cryptocurrencies. The report stated that Ethereum “currently appears to be the cryptocurrency with the highest practical use potential, because Ethereum is a platform for native cryptocurrency and the most popular smart contract application development platform.”

However, Goldman Sachs stated in the report that even if Goldman Sachs believes that Ethereum may eventually surpass Bitcoin, due to volatility, neither of these two cryptocurrencies will soon replace gold as the most common store of value. Goldman Sachs further explained that some commodities such as gold can hedge against bad inflation, while the bank’s cryptocurrency is more regarded as an “inflation risk hedge.” The bank said that such hedging would bring risks.

Goldman Sachs is cautiously but optimistically asserting that although encryption has considerable concerns, in the end, it will become a viable asset class and will continue to exist.

Soon after the report was released, in June 2021, Goldman Sachs invested 54 billion won (about 310 million yuan) in South Korea’s KCOIN. KCOIN is a cryptocurrency that can be used like cash. It can be used to pay for online shopping malls and offline franchise stores, communication expenses of the three major domestic news agencies, gas expenses, national pensions, and health insurance premiums. As long as you log in to the mobile chat app called KTALK, users can accept KCOIN or give KCOIN to each other, and can pay for electronic merchandise coupons.

In the same month that it invested in KCOIN, Goldman Sachs also partnered with crypto investment giant Galaxy Digital to launch a bitcoin futures trading product for customers. Galaxy Digital positions the company as a bridge between traditional financial companies and cryptocurrency trading companies, mainly helping Goldman Sachs clients such as large hedge funds and institutions to invest in Bitcoin.

In addition, Goldman Sachs also revealed that it will provide options and futures trading in Ether in the future.

The cryptocurrency view of the five major U.S. banks: Issuance, investment, and transaction are all involved

Services and investments launched by the five largest U.S. banks in the field of cryptocurrency

Market demand for investment in crypto assets is rising sharply

JPMorgan Chase is an opponent of Bitcoin, especially its CEO Dimon. After JPMorgan Chase applied for a cryptocurrency fund, Dimon issued a statement saying: “I really don’t care about Bitcoin. I am not interested in Bitcoin. But customers are very interested, and I can’t tell them what to do.”

Goldman Sachs restarted its cryptocurrency trading platform after a lapse of three years. Matt McDermott, head of its cryptocurrency department, said in an interview that institutions have a huge demand for crypto assets, which led to Goldman Sachs restarting the cryptocurrency trading platform.

Cryptocurrency has ushered in a period of explosion in the near future. Companies such as Tesla, Square, and Microstrategy have deployed cryptocurrencies. This has also led many commercial investment institutions to focus on cryptocurrency. Grayscale is a global cryptocurrency asset management company, and its funds received investment from many institutions in the fourth quarter of 2020. These all reflect that enterprises and institutions have begun to deploy cryptocurrencies and expand their demand. Naturally, traditional banks also want to get a share of the pie.

The cryptocurrency view of the five major U.S. banks: Issuance, investment, and transaction are all involved

Source: Grayscale official website

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