May 1, 2021 / VOLUME NO. 155
Cryptocurrency Is Here to Stay

After decades of denying climate change, big oil companies changed their tune. They’re now investing billions in alternative energy and pledging to reduce greenhouse gas emissions. 

Banks have their own existential threat to contend with: cryptocurrency. Cryptocurrency is obviously nothing like clean energy. But like the big oil companies, banks are only recently coming on board with crypto. JPMorgan Chase & Co. Chairman and CEO Jamie Dimon called the largest cryptocurrency, bitcoin, a “fraud” in 2017. “It’s worse than tulip bulbs,” he said, referring to a 17th century symbol of market bubbles. Crypto mania hasn’t gone away. The price of a volatile bitcoin stood just north of $55,000 Tuesday, nearly 615% higher than its price a year ago. It reached an all-time high of $64,829 a few weeks ago, according to the news publication Coindesk.

What has changed is the attitudes of big banks like JPMorgan. Dimon’s institution reportedly is planning to offer an actively managed bitcoin fund to private wealth clients as early as this summer, reports Coindesk. 

Morgan Stanley already beat JPMorgan to the punch as the first big U.S. bank to grant wealth clients access to bitcoin funds. And another big bank, Minneapolis-based U.S. Bancorp, announced a series of crypto plays this week, including its selection to administer a bitcoin ETF for NYDIG, a bitcoin subsidiary of alternative asset manager Stone Ridge.

For years, banks focused more on blockchain, the underlying technology, rather than the investor-fueled mayhem that is bitcoin, Bank Director’s Emily McCormick wrote back in 2018. Blockchain is a distributed ledger where participants can transfer assets without a centralized authority. 

Proponents argue that blockchain technologies will facilitate fraud-proof transactions while simplifying and improving payments and cross border transactions as well as stock trades. It could also wipe out fees for intermediaries in financial transactions — such as banks — if they don’t adapt. “We’re in the top of the first inning,” explains John Philpott, general partner at FINTOP Capital. The firm recently raised a $150 million investment fund with JAM Special Opportunity Ventures exclusively from community banks to invest in financial technology companies. 

The potential of blockchain and cryptocurrencies has become hard for any bank to ignore. Similar to a cleaner electricity infrastructure and solar panels, it looks like they’re here to stay. 

• Naomi Snyder, editor of Bank Director
PNC Financial Services Group, Huntington Bancshares and Credit Human credit union are offering greater flexibility for their retail customers.

“With this new tool, we’re able to shift away from the industry’s widely used overdraft approach, which we believe is unsustainable.” William Demchak, chairman and CEO, PNC
Financial Services Group

• Joan Susie, chairman of Bank Director and FinXTech
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