Wall Street banks are entering the cryptocurrency market, but remain cautious under regulatory pressure

This article is from ChainNews, authored by Amy Liu.

As demand from clients for investing in cryptocurrencies grows, more and more investment banks are beginning to offer cryptocurrency services. However, facing regulatory pressure, Wall Street banks remain cautious in their approach to cryptocurrency.

Goldman Sachs CEO David Solomon stated earlier this month at a congressional hearing that the bank is restricted by regulations from acting as a major trader of cryptocurrencies or holding a majority of cryptocurrencies.

Bank of America has established a new team dedicated to researching cryptocurrencies, which is the latest effort by Wall Street to profit from investors' enthusiasm for digital assets.

According to an internal memo to employees from Bank of America, the team is led by Alkesh Shah and will also cover technologies related to digital currencies, reporting to Michael Maras, head of global fixed income, currencies, and commodities research at Bank of America.

Candace Browning, head of global research at Bank of America, stated in the memo: "Cryptocurrencies and digital assets represent one of the fastest-growing emerging technology ecosystems. With strong industry research analysis, a market-leading global payments platform, and blockchain expertise, we are uniquely positioned to provide thought leadership."

Wall Street banks are seeking to expand into the cryptocurrency world, with many banks attempting to offer wealth management products or custody services for this asset class. Some banks, including JPMorgan and Goldman Sachs, have already begun offering cryptocurrency futures trading.

Goldman's prime brokerage division is clearing and settling cryptocurrency exchange-traded products (ETPs) for some hedge fund clients in Europe, currently offering these services to a limited number of clients, as Goldman is internally reviewing the matter with an eye toward rolling out the service to more clients.

JPMorgan has become the first major bank to expand cryptocurrency trading permissions, and not just for high-net-worth clients. The bank has been aggressively developing its $630 billion wealth management business, informing wealth management advisors in a memo earlier this week that they can now place orders to buy and sell five cryptocurrency products, four of which are from Grayscale and one from Osprey Funds, effective July 19.

Nadine Chakar, Vice President and Global Head of Markets at State Street, stated in an interview with The Scoop that State Street is working with clients to develop solutions to help them allocate Bitcoin and other crypto assets.

She noted that despite the recent price drop of crypto assets, market interest has not waned: "The price depreciation has not affected demand and interest at all. I think we still see a lot of people enthusiastically embracing digital assets, in some cases cryptocurrencies. And every day you see some large hedge funds or major investors describing their support for digital technologies."

BNY Mellon is following in the footsteps of banking giant State Street to provide business support for the new bank-grade cryptocurrency trading platform Pure Digital.

Bank of America's prime brokerage division has begun clearing and settling cryptocurrency exchange-traded products (ETPs) for hedge funds in Europe, and Bank of America has also approved Bitcoin futures trading for some clients and is clearing cash-settled contracts. Demand for products like crypto ETPs has been increasing, and according to Bloomberg data, Goldman Sachs, ICAP, JPMorgan, and UBS are all purchasing 21Shares Polkadot ETP for clients.

Citigroup and UBS remain indecisive. Citigroup's global foreign exchange head Itay Tuchman told the Financial Times that since last August, the bank has seen a surge in interest in cryptocurrencies from large clients, and discussions are underway regarding trading, custody, and financing services. Tuchman stated that Citigroup is not in a hurry to make a decision: "We will enter the (cryptocurrency market) when we are confident that we can create products that are beneficial to clients and supported by regulators."

UBS stated in a report that cryptocurrencies are speculative assets, not currencies, and regulation is just one of their many drawbacks. UBS warned that the recent crash in cryptocurrencies highlights the volatility and speculative nature of this relatively new asset class, which is not suitable for inclusion in investors' portfolios, and advised clients to be cautious in crypto speculation.

The influx of Wall Street financial institutions into cryptocurrency services has been uniformly attributed to the increasing demand from clients. In the future, banks that hesitate to enter the cryptocurrency space may ultimately be compelled to respond to the growing client demand. Cryptocurrencies have developed into a force that Wall Street giants cannot ignore.

In the past week, the U.S. entered the second quarter earnings disclosure season, and we have seen many companies increasing their Bitcoin holdings in various ways. For example, Edge Wealth increased its holdings of GBTC by more than 50,000 shares, a 43.95% increase compared to before, while Rothschild Investment Corporation more than doubled its Bitcoin investment exposure, and ARK Funds purchased over $10 million in GBTC.

Additionally, a pension fund in New Jersey invested $7 million in stocks of Bitcoin mining companies, which are all aggressively increasing their Bitcoin positions through traditional markets. This is why Bitcoin has rapidly rebounded from below $30,000 to around $34,000 recently, supported by market funds.

Wells Fargo, Citigroup, JPMorgan, Goldman Sachs, Morgan Stanley, and Bank of America appeared before the Senate Banking Committee and the House Financial Services Subcommittee.

Wells Fargo CEO Charles Scharf stated in his speech: "We continue to closely monitor the development of cryptocurrencies. Although the status of cryptocurrencies as a currency and payment mechanism remains unstable, cryptocurrencies have emerged as alternative investment products."

Original link: https://www.chainnews.com/articles/500478221474.htm