Bitcoin, banks and blockchain: Here’s what Goldman Sachs, JPMorgan and others are planning

When cryptocurrency prices skyrocketed towards the end of last year, banks and institutional investors kept their eyes peeled.

Most of the biggest names on Wall Street and in the city have now announced plans to give their customers access to cryptocurrencies.

However, some have chosen to buck the trend as environmental, social and governance concerns abound.

The value of cryptocurrencies has continued to fluctuate a lot. Bitcoin was on the verge of doubling in value this year when it hit an all-time high of $ 64,829. The token has suffered a number of sharp drops since then, bringing its gains around 30% in 2021.

Here’s what we know so far about how the world’s largest banks handle cryptocurrencies and who’s staying out of the action.

Goldman Sachs

Goldman’s cryptocurrency trading desk has seen something of a resurrection this year. After crypto prices first hit the market back in 2018, when crypto prices far exceeded their previous bubble, it was time for the investment bank to get back into the game.

Headed in London by the bank’s Global Head of Digital Assets, Mathew McDermott, the desk initially trades CME Bitcoin futures and non-deliverable forwards for institutional clients. In addition, it provides clients with regular sector research and insights, while Goldman’s strategic investment unit takes holdings in affiliated startups.

READFrom Bitcoin to Blockchain: In the Goldman Sachs crypto unit

McDermott told Financial news in March that the bank may consider buying, selling and holding cryptocurrencies itself as soon as regulation allows. His team works on projects in the areas of enterprise blockchain, digital transactions, digital wallets and stablecoins.

However, Goldman decides not to develop its own blockchain technology for the time being, and instead prefers to work with external providers such as those developed by R3 and Consensys.

JPMorgan

JPMorgan has largely focused on blockchain in its digital asset development over the past year and introduced a unit for the technology in October.

The onyx branch of the bank, which was under construction for five years before launch, employs more than 100 people. The two most important releases to date include JPM Coin, the bank’s own token, and a blockchain-based interbank payment network called Liink.

READJPMorgan ventures into space to test its blockchain technology

However, when it came to cryptocurrencies, JPMorgan was more hesitant. While its analysts bullish on Bitcoin compared to the rest of the sector, its CEO Jamie Dimon has been relatively calm on the matter after dismissing Bitcoin as a risk of fraud four years ago.

The bank is to examine an actively managed Bitcoin fund for its private wealth customers, which is to be launched as early as summer 2021. The fund, as reported by Coindeskwho would use NYDIG’s custody services.

READJPMorgan is set to prepare Bitcoin funds for private wealth customers

JPMorgan too submitted a proposal with the US Securities and Exchange Commission to launch a basket of stocks with exposure to cryptocurrencies in March. The basket would include companies like MicroStrategy and Square that hold significant amounts of Bitcoin in their corporate coffers.

City group

Although its analysts previously represented the advantages of cryptocurrencies, Citigroup is taking a cautious stance on the sector.

The bank’s global forex chief Itay Tuchman said last month that the bank is reviewing its offering of trading, custody and funding for cryptocurrencies, but that a final decision has not yet been made on whether customers would get access.

READCitigroup ponders crypto service for customers

“We shouldn’t do anything that is not harmless. We’ll step in when we’re confident we can create something that customers can benefit from and regulators can support, ”Tuchman said in an interview with The Financial Times.

BNY Mellon

BNY Mellon has a new digital assets unit in the works, with plans to offer an integrated service to customers.

The investment bank announced in February that it is developing a customer-facing prototype that will be “the industry’s first digital multi-asset custody and management platform” for cryptocurrencies.

HSBC

HSBC has been one of the fiercest critics of cryptocurrencies in recent months, despite the fact that its competitors in the industry have made strides.

The bank’s chairman of the board, Noel Quinn, said earlier this month that volatility and a lack of transparency in cryptocurrencies are preventing HSBC from getting into the space. The bank has no plans to set up a trading desk or offer any exposure to clients.

READHSBC has no plans to get into crypto, says boss Noel Quinn

“Given the volatility, we’re not into Bitcoin as an asset class. If our clients want to be there, of course, but we’re not promoting Bitcoin as an asset class in our wealth management business, ”said Quinn Reuters in an interview on May 24th.

However, HSBC has been developing a blockchain-based platform called Digital Vault, which uses R3’s open source technology, since early 2020.

The custodial platform, which gives investors real-time access to records of securities purchased in private markets, will host more than a third of HSBC’s own eligible assets. A spokesman for HSBC said Financial news in February that the bank expects to move regular transactions to the network from the first quarter of 2021 after investing around $ 5.8 billion in technology efforts in 2020.

Barclays

Barclays is another of the few big banks that have spoken out against cryptocurrencies as an investment and has said little about the sector since the price boom began last year.

In a rare statement released in January, Barclays’ private banking arm said it viewed Bitcoin as “almost non-investable” because of its extreme volatility and few diversification benefits for large investors.

READBarclays private bank criticizes Bitcoin as “almost not investable”

The bank said in a 2019 report that it has started investigating use cases for blockchain but has not disclosed any further details.

UBS

While it is not yet offering its clients exposure to cryptocurrencies, UBS has made significant strides in developing a private stablecoin.

As part of an initiative called Fnality, lenders such as UBS, Santander and Lloyds Banking Group are developing a utility token for processing cross-border transactions. Fnality recently applied to the Bank of England for access to potential account settlement structures as part of the central bank’s joint consultation on a digital currency with the UK Treasury.

READBank of England creates UK digital currency task force, backed by the Treasury Department

In 2019, UBS announced it would lead a consortium of lenders to launch a blockchain-based trade settlement platform called we.trade.

Other users of the UBS platform are Société Générale, Caixa Bank, HSBC, Santander, UniCredit, Nordea, KBC, Rabobank and Deutsche Bank, who use we.trade to process international transactions.

We.trade offers services such as bank payment guarantees and invoice financing and uses blockchain to support transactions between member banks on the platform.

Deutsche Bank

Deutsche Bank doesn’t currently offer crypto-related services to its clients, but that hasn’t stopped their investment and research team from exploring the sector.

The chief investment officer of the German lender, Christian Nolting, said in April that Bitcoin is “here to stay”, but has still not achieved mainstream status as an asset class by a long way. The German has advised her customers to treat cryptocurrencies “with caution,” adding that her future as an asset that could behave similarly to gold is uncertain while prices remain volatile.

READWhy Deutsche Bank CIO Says Bitcoin Is “Here To Stay”

German research analyst Marion Laboure said last month that the value of Bitcoin “Totally wishful thinking”, and had gone from a trendy investment to a “sticky” one.

Labore compared the rise of cryptocurrency to the Tinkerbell Effect – an economic term based on Peter Pan’s claim that Tinkerbell only existed because children believed it did.

Standard Chartered

Standard Chartered will pave the way for institutional crypto trading among major investment banks and announced plans to develop a crypto exchange earlier this month.

As part of a joint venture with Hong Kong-based BC Group, StanChart will provide UK and European institutional and corporate clients with access to Bitcoin, Ether and other cryptocurrencies through a digital asset brokerage and exchange platform.

READStandard Chartered launches UK-based institutional crypto exchanges

“We firmly believe that digital assets will remain and be accepted by the institutional market as a highly relevant asset class,” said Alex Manson, head of StanChart’s venture and innovation unit.

Morgan Stanley

Morgan Stanley joined the cryptocurrency craze in March this year after plans for three Bitcoin-linked funds surfaced.

READMorgan Stanley will be offering Bitcoin funds to its clients starting next month

Two of the funds offered to accredited US investors are provided by Galaxy Digital, while the third is an exclusive joint initiative of FS Investments and NYDIG. The minimum entry threshold for the three funds ranges from $ 25,000 to $ 5 million and requires accounts to be existing Morgan Stanley clients.

To contact the author of this story with feedback or news, send an email Emily Nicolle

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