The Big Banks Are Coming For Bitcoin
No matter what Jamie Dimon may say, bitcoin's durability can be expressed by one simple fact: With a market cap of $100 billion, digital currencies have become too big for banks to ignore.
As Bloomberg recalls in a story about how banks are preparing to confront the thorny regulatory issues related to dealing in bitcoin and other digital currencies, on the same day Dimon trashed bitcoin, calling it a "fraud," his firm's private bank hosted a panel featuring cryptocurrency investors, and even helped some wealthy clients transact in a bitcoin exchange-traded product listed in Stockholm, raising questions about whether the bank violated its fiduciary duty in doing so.
Dimon isn't the only one of his peers to harbor reservations about bitcoin. Bridgewater Associates' Ray Dalio and BlackRock's Larry Fink have criticized it** as a "bubble" and a "a tool used by criminals."** Morgan Stanley CEO James Gorman defended bitcoin, arguing that it is "more than just a fad."
**But with clients demanding bitcoin exposure in greater numbers, banks have little choice but to assent to their demands, like JPM did.** Goldman's tentative embrace of bitcoin has so far also been the most ambitious, with the firm saying it is considering opening a bitcoin-trading business that would function like an interdealer broker for exchanges and large players.
Two days ago, Goldman CEO Lloyd Blankfein tweeted that he's still on the fence about bitcoin, and that he's "not endorsing or rejecting" the digital currency.
Still thinking about #Bitcoin. No conclusion - not endorsing/rejecting. Know that folks also were skeptical when paper money displaced gold.
— Lloyd Blankfein (@lloydblankfein) October 3, 2017
But for banks hoping to enter the bitcoin business, many unanswered questions remain. For example, how do banks that are required by law to prevent money-laundering handle a currency that's not issued by a government and that keeps its users anonymous?
According to Bloomberg, handling bitcoin would invite scrutiny from every major U.S. regulator, according to Joshua Satten, director of emerging technologies at Sapient Consulting.
"From the perspective of the U.S. Treasury, do you classify it as an asset class or a currency?" Satten said. "If banks are starting to manage and hold bitcoin for their clients, you would have the OCC and the FDIC looking at how they classify the assets on their balance sheet and how they state the assets for the portfolio of a client."
However, the advent of cryptocurrency focused hedge funds like the $500 million crypto-focused fund being planned by Mike Novogratz means that banks risk falling behind their competitors if they hesitate.
Already, there are 75 funds investing in the space, according to Autonomous Research.
And that number will likely rise after the Chicago Board Options Exchange introduces bitcoin futures and options, which it says it's planning on doing some time next year, making it easier for traditional investors to gain exposure to bitcoin.
Other potential applications for bitcoin that are being considered by banks include derivatives contracts and using the digital currency for trade finance, Bloomberg reported. For regulators considering how to move forward, Switzerland created a precedent over the summer when it granted a license to Falcon Bank to transact in bitcoin on behalf of its wealth-management clients.
However, while an endorsement by the banks would help cement bitcoin's reputation as a legitimate asset, it could also bring changes as regulators demand more transparency. After all, the lack of transparency and the difficulty enforcing financial laws were both cited by the SEC as reasons for the rejecting two proposed bitcoin ETFs back in March.
Assuming US regulators assent to allowing banks to deal in bitcoin, the fundamental question then becomes: Will the banks change bitcoin? Or will bitcoin change the banks?
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If you can't beat it, join it!! Bitcoin is here to stay and will create way better systems than the current banking system and they finally realize it!!
I definitely agree with you @michiel . Bitcoin will change banking, as well as STEEMIT will change social networks and will make the biggest redistribution of wealth in the worlds history, creating freedom, and taking out the power from banks and government, returning it to the people, which is were it belongs. Just upvoted your comment. @gold84
They're just posturing and feeding narratives while they accumulate and solidify their positions. They know crypto is here to stay and just want to make sure they're the gate keepers like they are in every other financial market.
"Will the banks change bitcoin? Or will bitcoin change the banks?"
Great question, judging from history, they will both change but banks will be greatly diminished in their power. This reminds of how cars changed horse carriages, how TV changed movie theaters, the Internet printed newspapers etc, they haven't disappeared entirely but they are now a fraction of what they used to be
@cryptoeagle I agree with you. Both will change, as I mentioned to @michiel above, freedom will come, and the biggest redistribution of wealth will take place. Power will go to the hands of people, while at the same time the governments and banks will be loosing their control. @gold84
@cryptoeagle thanks for your support, I checked some of your past post and they are of great quality, I am following you, and I willcertainly mention you in one of my future posts. @gold84
Thanks gold84!
You are welcome @cryptoeagle . Thanks to you.
Banks have already taken over Bitcoin development and changed it into their segwit-coin that will be AML-KYC and they will control it.
Real Bitcoin had to fork off and rename itself Bitcoin Cash.
How does segwit relate to AML-KYC ?
It doesn't, he is a low information troll.
Hey smartass, who funded segwit development?
Who do you think funded Segwit development?
Pieter Wuille did it, he didn't need to be paid.
LOL. DCG funded Segwit. Pieter came up with the idea, but people were paid to code it.
Bitcoin Trash is the REAL bitcoin guys!!!!
While bitcoin is certainly the first thing that people think of when they think cryptocurrency, I don't understand why banks are not looking at so many other options - there are so many other interesting projects that deserve attention and where there is potential for growth. We already see many crypto funds coming up to drive investments in ICOs and cryptocurrencies so banks will probably be a little late to the game but nevertheless they will eventually come.
We will have to see how governments in turn regulate the banks from dealing in cryptos; it will not be a easy path I suppose.
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The banks will always follow where the money goes. That will always be the case until crypto can gain enough traction from decentralization.
The old dying banks are getting worried and desperate
We don't need anymore banks with crypto-currency
The bitcoin community will overtake and control the banking community soon enough people will see the new bitcoin world order realized. The banking system will be no more in 100 years or less.