3 months ago

    The global landscape of crypto banking: navigating risks and opportunities in an evolving market

    Table of contents

      The price of bitcoin has surged back from its 2022 lows of $14k and is now steady at around $23k – despite recent setbacks – but does that mean cryptocurrency can stand alone from the banking industry? Far from it!

      The demise of Silicon Valley Bank rapidly followed by the implosion of Credit Suisse sent shockwaves through the financial world leading to something of an upsurge in the evaluation of Bitcoin and cryptocurrencies generally.

      Despite this, cryptocurrency, and the crypto-related businesses that deal in it, need traditional banking more than ever. Without banks, crypto businesses struggle to integrate ‘fiat’ payments. 

      Purchasing cryptocurrency, realizing gains making payments, and transacting in cryptocurrency are all made smoother, easier, and more reliable with the aid of banks willing to transact the crypto from their clients’ accounts. Mainstream banks are still required for payroll and settling accounts. 

      The risk associated with cryptocurrencies are being addressed, albeit slowly and haphazardly worldwide, but where regulations are being tightened traditional banks are becoming indispensable partners.

      Crypto-friendly or crypto-cautious?

      A crypto-friendly bank is one that lets customers make transfers to a crypto exchange, some, but not many, even allowing the purchasing of crypto on credit. However, most crypto services are individual-focused, with very little available for provided for crypto businesses looking to conduct their day-to-day operations. So while the trend is slowly towards offering customers the ability to purchase crypto, it’s less so for businesses wishing to transact in it.

      In January 2023, The Fed, Federal Deposit Insurance Corp., and the Office of the Controller of Currency all warned banks to keep away from crypto, citing the high-profile crypto failures of 2022.  Many did so, but plenty still provides services to crypto businesses including Customers Bancorp, Western Alliance, JPMorgan Chase, and Bank of New York Mellon.  Likewise, in Canada, whilst many Canadian banks allow account holders to purchase crypto, few are able to offer solutions for crypto businesses. 

      A changing global landscape

      Brazil has a huge appetite for bitcoin amongst it population with Banco do Brasil, the nation’s largest public bank, now allowing Brazilians to pay taxes with cryptocurrencies – an arrangement that will extend to allow institutional clients to pay taxes and carry out payroll in crypto – a huge step.

      As crypto-friendly banks in the US were warned away, the take-up has tended to outflow into other countries, especially havens. Clarien, a Bermuda-based bank, markets itself to crypto startups. Unsurprisingly, considering the country has adopted Bitcoin as legal tender, El Salvador’s major crypto-friendly banking option is Chivo, a government-backed payment app.

      In Europe, the world’s largest crypto economy, major proposals are coming with the Markets in Crypto Assets (MiCA) regulation. Many banks position themselves to take advantage of a positive and coherent regulatory regime for crypto businesses with other powerhouse economies, France, Switzerland, Germany, and the UK leading the way.

      La French Touch

      French banking authorities want to establish comprehensive crypto licensing before the 2024 start date of MiCA and in 2022, a French bank, Delubac & Cie, became the first in the country to offer regulated crypto services to crypto businesses looking for a banking partner. Germany too is moving swiftly forward. Its highly attractive 0% CGT on year-long crypto holdings, and is supported by the highest number of crypto-friendly banks in the EU. Institutional giants getting in on the action including DZ Bank partnering with crypto firm Metaco for a digital asset service.

      Crypto-friendly banking is on the increase around the world, and not just in the low-tax hot sports such as Lichtenstein, Malta, Bermuda, and Dubai. Switzerland, Hong Kong, Singapore, Japan, and South Korea – all with crypto-friendly banks offering a mix of crypto custody services and partnerships with crypto exchanges and services.

      And yes. The U.K. is in on the act too, despite many ups and downs with its regulatory approach.  Major crypto-friendly banks (to a lesser or greater extent) include RBS, ClearJunction, BCB Group, and Standard Chartered – even Barclays has a stake in the crypto firm, Copper. Much is dependent upon the U.K.’s Financial Services and Markets Bill (FSMB) coming soon – and also on MiCA in the EU.

      More and better regulation will make crypto safer and more mainstream – and that seems to be the position many banks are taking – even in the face of FTX and the current banking problems since SVB.

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