• JPMorgan boss Jamie Dimon and BlackRock CEO Larry Fink railed against Bitcoin & Co. early on.
• More and more leading banks and asset managers are offering crypto products
• Adaptation to the crypto sector serves one’s own survival
More than ten years have passed since the emergence of the first cryptocurrency Bitcoin. Blockchain technology was brand new, and many representatives of the traditional financial sector initially viewed it with skepticism. In the years that followed, skepticism about the original cyber motto and the following digital currencies, Ethereum & Co., continued to be vehement. Numerous prominent representatives of the financial sector insisted on completely denying cryptocurrencies any value or benefit. Unforgotten is the statement made by JPMorgan boss Jamie Dimon a few years ago at an investor event, in which he called Bitcoin a “scam” that would inevitably “blow up”. Or BlackRock CEO Larry Fink, who emphasized in 2017: “Bitcoin just shows how great the demand for money laundering is in the world … It’s nothing more.”
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JPMorgan and BlackRock are leading the way
A lot has happened at the two financial institutions in the meantime – in relation to cryptocurrencies. The asset manager BlackRock is now cooperating with the trading platform for digital foreign exchange, Coinbase, to enable institutional investors to trade Bitcoin. Blackrock’s Global Head of Strategic Ecosystem Partnerships Joseph Chalom said: “Our institutional clients are increasingly interested in gaining exposure to the digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets.” Shortly after the announcement, the financial company also launched another product for crypto enthusiasts, namely the Bitcoin Private Trust for US institutional investors.
The situation is similar with the US finance house JPMorgan. The bank now uses its own token, the JPM Coin, and has set up its own business division to bundle all of its own blockchain projects. In addition, the credit institution now offers its investors access to numerous Bitcoin funds and has even opened a digital branch in the Metaverse.
The two financial heavyweights are by no means the only ones who have somewhat shed their initial caution about cryptos. Investors in the asset manager Fidelity can also include cryptocurrencies in their custody accounts that they have set up for old-age provision. And Schroders has also opened up the market for digital currencies with a stake in the Swiss fund manager Forteus, which focuses on cryptocurrencies.
DeFi offers more and more possibilities
The trend clearly shows that cryptocurrencies and the underlying blockchain technology are no longer outsiders. For example, the Swiss state bank Postfinance has now recognized that the blockchain has the potential “to fundamentally change many processes in the financial industry”, as the institute writes according to the NZZ. The bank is particularly impressed by the area of decentralized finance, DeFi for short, which now offers almost everything that the traditional financial sector has to offer.
Counteract competition from Coinbase & Co
However, the fact that a rethink is taking place in the traditional banking sector should not be due to the fact that the initial caution vanished into thin air. Rather, the adjustment of the financial sector serves the struggle for long-term survival. Crypto brokers such as Coinbase & Co. are already popular with younger clients in particular. What if one day these crypto companies came up with the idea of expanding into traditional banking and taking their customers directly with them?
Nils Bulling, head of strategic innovations and digital assets at the Swiss banking software developer Avaloq, told the Neue Zürcher Zeitung: “Young customers who have already parked their assets on Coinbase or other platforms will no longer be treated like that in this scenario easy to win back. Then the point of contact with the younger generation is lost.” Although the crypto industry is still struggling with a lack of trust in traditional financial companies due to high volatility and unclear regulation, this could change in the long term. Avaloq is therefore already working on its own crypto broker that offers investors autonomy when trading and storing digital currencies, but at the same time meets all regulatory requirements.
According to industry expert Rino Borini, a large-scale crypto offensive in traditional financial companies is still failing due to a lack of will on the executive floor. He says to the NZZ: “The banks often have people who are extremely fit in DeFi topics. But they also have to be heard by top management. I always tell the banks: You underestimate the power of the private sector. If they want to buy something , they no longer go to their house bank, but to Coinbase.” How the whole thing develops in the long term, however, remains to be seen.
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