Big Banks Are Overcoming Crypto Skepticism
JPMorgan CEO Jamie Dimon once said that Bitcoin was a “fraud” and that he would fire anyone at JPMorgan who was found to be trading in Bitcoin. He has since changed his stance, stating that if clients want to invest in crypto assets, JPMorgan has a responsibility to provide the means to do so safely.
JP Morgan’s Bitcoin fund, which is passively managed, is being offered in partnership with NYDIG, the Bitcoin arm of asset-management firm Stone Ridge. The fund is being presented to clients as the most secure and cost-effective means to invest in Bitcoin on private markets. The private fund will also act as a port to a Bitcoin exchange-traded fund (ETF) if crypto ETFs are approved by the US Securities and Exchange Commission (SEC).
Like Dimon, Wells Fargo Research Development president Darell Cronk has also changed his stance. Previously wary of crypto due to its unregulated nature, he now thinks it is mature enough to be considered as an investment asset. In a recent interview, he stated that the company has been searching for a “professionally managed solution” for months. He added that “The cryptocurrency space has just kind of hit an evolution and maturation of its development that allows it now to be a viable investable asset."
Cronk further stated that in his mind, the huge market cap of Bitcoin and other cryptocurrencies gave them more validity as investment options.
The investment-research division of Wells Fargo Wealth and Investment Management will implement an actively managed fund. It’s still unclear whether clients will be able to purchase Bitcoin through the fund, or through a second order of price exposure, like Grayscale Bitcoin Trust (GBTC).
Are Big Banks Ready For Crypto Custody?
These big banks, once anti-crypto, have now become active participants in the digital assets arena. This shift in stance will have a legitimizing effect on the crypto space as a whole. Names like JPMorgan and Wells Fargo bring a lot of much-needed clout with them. This recognition will help counter the adversities that crypto has had to endure in 2021 in terms of global regulatory scrutiny, security concerns (ransomware) and environmental concerns.
The OCC’s regulatory clarification in 2020 stated that US banks could offer custodial services to clients. Back then, the Big Banks were slow to jump on the bandwagon. However, continuous adoption of crypto assets and support from companies like Paypal and Square has driven a sense of urgency to catch up.
It’s likely that the news of these firms’ new crypto-friendly stance will cause a domino effect in adoption from other traditional finance institutions. With big names in traditional finance starting to get on board, it’s only a matter of time before smaller firms start following suit or risk getting left behind.
However, these institutions’ opposition to crypto is well documented and there is a steep learning curve for digital currencies. It raises the question of whether they are ready to take on the role of digital asset custodians. These are new ecosystems, which presents a completely new paradigm for them in terms of asset management and security. With all the intricacies of crypto custody, and the complexity of digital asset hacks, it is unlikely that banks will build their own solutions. It’s far more likely that they will use the best industry solutions or simply buy the firms that provide them, as has already started to happen.
Crypto Custodial Solution Providers Soar in Value
It’s increasingly clear that premier digital asset custodial platforms and security solutions have become incredibly sought after and are being snapped up one by one.
In March 2021, Curv was acquired by PayPal for “under $200 million” while Fireblocks raised $310 million in its Series D soon after. BitGo was bought for $1.2 billion in May 2021 by Galaxy Digital, despite having been fined by OFAC only months earlier. Last but not least, CYBAVO recently raised $4 million in a pre-Series A funding round to expedite our global expansion.
Specialists in cybersecurity like CYBAVO are best equipped to provide the quality of digital asset custody and security solutions for institutions looking to provide crypto custody services.
We welcome all enquiries and will be happy to provide you with the expertise and services to start your journey into crypto custody. Get in touch here
CYBAVO is the leading provider for blockchain security solutions in Asia Pacific. Its extensive list of enterprise customers include cryptocurrency exchanges, fund management companies, cryptocurrency wallet providers, and various fintech service providers. The company is insured by S&P AA-rated global reinsurance company, and holds certifications for ISO 27001 and NIST’s Cryptographic Module Validation Program.
CYBAVO was established in 2018 by a team of cybersecurity veterans with backgrounds in blockchain security, cryptography, computer security, malware analysis and web security. Its mission is to provide the most advanced digital asset custody by developing a custom security-hardened operating system, patented encryption technology, and a highly secure sandboxed environment to deliver its suite of solutions, including its flagship product, the CYBAVO VAULT.
CYBAVO VAULT is an institutional-grade cryptocurrency wallet that leverages proprietary NIST-certified cryptographic algorithms. It offers a SaaS or on-premise solution that features a unique multi-level approach to transaction authorization, which allows for the creation of any number of purpose-specific wallets, each governed by its own policies. CYBAVO VAULT also delivers a suite of tools that help organizations rapidly integrate and scale-up blockchain based operations.