The Largest U.S. Banks Are Starting to Embrace Crypto

The largest U.S banks are slowly but surely embracing cryptocurrencies as more clients are inquiring about digital assets. It’s certainly a marked shift in sentiment for an industry that’s difficult to sway.

Institutions willing to take on more risk in lieu of return, like hedge funds, have already been dabbling with cryptocurrencies in some form or fashion. More traditional banking entities like pension funds and mutual funds have been more hesitant.

Now, according to a Wall Street Journal article, cryptocurrencies are at least in the conversation. One of the reasons is the stock and bond market in 2022, which both have been heading downward in unison.

“It’s gotten to the point where everyone is at some point in the journey,” said Mike Demissie, head of digital assets and advanced solutions at Bank of New York Mellon Corp. “If they’re not actively investing [in crypto], then they’re exploring it.”

As such, money managers are looking for other avenues of return, and cryptocurrencies seem to fit the bill. Despite the broad crypto market following stocks and bonds recently, this highlights the growing interest in digital assets.

“It’s a moment in time when the traditional industry has woken up and more broadly accepted this is happening,” said Walt Lukken, president and chief executive of the Futures Industry Association.

Still Waiting on the Sidelines

Despite the growing interest, it’s not as if all banks are ready to jump in headfirst. More regulatory measures must still be in place before other banks join in on offering their biggest clients digital assets.

Firms such as Goldman Sachs are one of those that are still waiting on the sidelines before trading in cryptocurrencies directly. However, they are opting for trade executions for Bitcoin options and futures.

Despite this, rather than dismissing cryptocurrencies wholeheartedly, there’s an awareness that something big could be on the horizon. As the Wall Street Journal noted, at “the Futures Industry Association’s recent annual conference, crypto was everywhere.”

“They all understand something revolutionary is taking place that will impact parts of their business model,” said Damien Vanderwilt, co-president of Galaxy Digital Holdings Ltd. “When they stop and think, `What do we do about it,’ the answer for most banks is that the opportunity today is not big enough to take the reputational risks of being early.”

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