The attitude of giant banks towards Bitcoin Cs has changed in recent years, from being disdainful to being cautiously interested. But Wall Street hasn’t fully embraced the digital currency yet.
Cryptocurrency is no longer condemned as a strange alternative investment, and even central banks around the world are considering issuing digital currencies. This was reported by CNN, Monday (3/5/2021).
Bitcoin is trading for over US $ 50,000 per token, and Dogecoin which literally started out as a joke is now one of the largest digital currencies.
Last month, crypto trading platform Coinbase went public with a valuation of nearly US $ 100 billion. That should be a warning to the big banks because Netscape’s 1995 IPO was a Sputnik moment for the tech industry. Joke, Dogecoin, is now the biggest digital currency.
Reasons Many Are Still Doubtful About Cryptocurrency
One of the reasons banks are hesitant is because cryptocurrencies are still struggling with regulatory issues. As a currency, they face very little regulation. But as securities, like stocks and other investments, they will face a different level of scrutiny.
In December 2020, the US Securities and Exchange Commission filed a lawsuit against crypto platform Ripple and its leadership. The platform is illegally selling unregistered securities in the cryptocurrency XRP for US $1.3 billion.
The ongoing case suggests XRP is a security and not a currency, otherwise the securities laws would not apply. Ripple rejects the label.
Such cases link to huge regulatory uncertainty for other large cryptocurrencies, making it difficult to engage with tightly regulated banks.
“Undoubtedly, Ripple’s actions are an example of a dark cloud of regulation that could potentially hang cryptos apart from Bitcoin or Ether,” Ashley Ebersole, partner at Bryan Cave law firm Leighton Paisner and former SEC attorney told CNN Business.
The regulatory uncertainty is scary for companies looking to take part in the crypto train. But in the end, the banks will likely be able to step in.
Crypto Flow Continues to Increase
Goldman Sachs (GS) reportedly restarted its crypto trading desk in March and will soon be offering its private wealth management clients to invest in crypto.
Goldman Sachs CEO David Solomon said in April that the cryptocurrency’s rapid rise meant that there would be significant disruptions and changes in the way money moves around the world.
“We need to operate within the current regulatory guidelines,” Solomon said. “For example, we cannot own Bitcoin or trade it as a principal,” he continued.
Meanwhile, JPMorgan (JPM) Co-President Daniel Pinto said that if the demand for crypto from clients continues to increase and the asset class continues to grow and develop, banks cannot just stand by.
Digital currency can be a new financial product involving banks. “Does it require new and different financial controls? Maybe,” Ebersole said.
To be sure, Wall Street’s big names have made their money off of the latest crypto-mania battle. Goldman is the premier bank for Coinbase’s direct listing for example, meaning companies earn the highest fees for their investment banking efforts.
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