Which Banks Bet Big On Crypto?

A growing number of banks are investing in crypto as an essential asset class. 55% of the world's top 100 banks by assets under management are investing directly or indirectly in companies and projects related to digital currencies and blockchain. These include big names such as Standard Chartered, BNY Mellon, Citibank, UBS, and Goldman Sachs. This trend is driven by the skyrocketing profits of cryptocurrency startups, regulatory advancements, and the increasing demand among bank customers for exposure to digital assets.

Banks are investing in crypto custody solutions

According to Blockdata, banks have been investing the most in the area of crypto custody. 23 out of the top 100 banks are either building their own custodial technology or integrating a tech provider's product into their systems. This trend is driven by the increasing demand for digital asset products and services from clients, including hedge funds, asset managers, family offices, corporations, and even retail customers.

Crypto custody solutions offer a range of services such as safekeeping, analytics, trading, pricing and valuation, and payments and settlements. By investing in these solutions, banks can provide their clients with secure and efficient management of their crypto assets.

Some banks have chosen to develop their own in-house technology for digital asset custody. For example, Nomura's Komainu and Standard Chartered's Zodia custody platforms are built using their internal technology. Other banks prefer to acquire custody providers or purchase the technology from external vendors.

As the crypto market expands and regulatory frameworks become clearer, the demand for crypto custody services is expected to increase. With the growing interest from institutional and retail investors, banks are likely to consider these services as a mandatory offering to retain customers and remain competitive.

Crypto and blockchain firms are receiving early- and late-stage funding from banks

According to Blockdata, a blockchain market intelligence outfit, 55 out of the top 100 banks by assets under management (AUM) have some form of exposure to the novel technology. This involvement includes direct and indirect investments in crypto and decentralized ledger technology firms by the banks themselves or via their subsidiaries.

Barclays, Citigroup, and Goldman Sachs are among the most active backers of crypto and blockchain firms, with JPMorgan and BNP Paribas also identified as serial investors in the space. These investments are part of a larger trend of significant backing for blockchain startups, with funding figures already doubling the amount recorded in 2020, as per a KPMG report.

The research also highlights crypto custody as a major focus for banks venturing into the crypto space. Almost a quarter of the top 100 banks by AUM are either developing crypto custody solutions or investing in startups that offer custodial services for digital assets.

The growing involvement of banks in the crypto and blockchain space can be attributed to three main factors: the skyrocketing profits of cryptocurrency startups, regulatory advancements, and the increasing demand among bank customers for exposure to digital assets.

As the cryptocurrency market continues to boom, reaching a value of $2 trillion, banks are recognizing the potential of this emerging industry and are increasingly investing in crypto and blockchain firms at various stages of development.

Banks are investing in blockchain companies

Banks are increasingly investing in blockchain companies, with 55% of the world's top 100 banks investing in the crypto and blockchain space. This shift in investment behaviour is largely due to banks recognising blockchain technology as an existential threat to their businesses.

Blockchain technology has the potential to radically change the services banks offer their clients and the way those services are delivered. It will allow banks to see how the funds they disperse are being used, helping them tailor and improve their services, while making key business lines – particularly payments and trade finance – more efficient.

According to Shidan Gouran, president and CEO of Global Blockchain, an investment company focused on blockchain-related companies, banks are investing more in blockchain than tech companies because they see it as a bigger threat to their business. Gouran draws a comparison to Kodak, stating that "banks know if they lose the battle with this technology they will go the way of Kodak".

London-based Standard Chartered is currently leading the way in terms of the size of funding rounds, investing $380 million in blockchain companies. Meanwhile, its London-based rival Barclays is the most active investor based on the number of investments in blockchain companies.

Other major banks investing in blockchain companies include BNY Mellon, Citibank, UBS, BNP Paribas, Morgan Stanley, JP Morgan Chase, Goldman Sachs, MUFG, ING, BBVA, Nomura, and the Commonwealth Bank of Australia.

Crypto trading giants are making massive revenues

As of writing, Coinbase is valued at $58.09 billion. This is impressive considering that it only has a fraction of the workforce of traditional banking giants. This shows that crypto companies are able to generate massive revenues with a leaner team structure.

The huge revenue potential of crypto trading giants is attracting the attention of banks. According to Blockdata, 55% of the world's top 100 banks by assets under management have some form of exposure to crypto and blockchain technology. These banks are investing directly or indirectly in crypto and blockchain companies, with a total of $3 billion in funding so far, according to the analytics company.

Some of the banks that have made significant investments in the crypto and blockchain space include Standard Chartered, BNY Mellon, Citibank, UBS, BNP Paribas, and Morgan Stanley. These banks have invested in various projects and companies, including blockchain networks, trading technology providers, and crypto custody firms.

The growing involvement of banks in the crypto space is driven by three main factors: the skyrocketing profits of cryptocurrency startups, regulatory advancements, and the increasing demand from bank customers for exposure to digital assets. As crypto trading giants continue to generate massive revenues, we can expect to see even more banks jumping on the crypto bandwagon.

Banks are offering clients access to Bitcoin funds

As the price of Bitcoin continues to soar, banks are increasingly recognising cryptocurrency as an essential asset class. As a result, many are now offering their clients access to Bitcoin funds.

Morgan Stanley

In March 2021, Morgan Stanley became the first big US bank to offer its wealthy clients access to Bitcoin funds. The bank, which has $4 trillion in client assets, launched access to three funds that enable ownership of Bitcoin. These include the Galaxy Bitcoin Fund LP and FS NYDIG Select Fund, with minimum investments of $25,000, and the Galaxy Institutional Bitcoin Fund LP, with a $5 million minimum. Morgan Stanley is limiting Bitcoin investments to a maximum of 2.5% of a client's total net worth and only offering this opportunity to clients with at least $2 million in assets and an aggressive risk tolerance.

Other banks

Morgan Stanley is not the only bank to be investing in crypto. According to Blockdata, 55% of the world's top 100 banks are investing in the crypto and blockchain space, either directly or indirectly. This includes big names such as Barclays, Citigroup, Goldman Sachs, JPMorgan, and BNP Paribas. These banks are investing in crypto custody, as well as blockchain companies such as Ripple, Fireblocks, and Axoni.

There are several reasons why banks are increasingly investing in crypto and offering their clients access to Bitcoin funds. Firstly, the skyrocketing profits of cryptocurrency startups are making banks re-examine their initial reticence. Secondly, regulatory advancements are making the industry more attractive. Finally, the increasing demand among bank customers for exposure to digital assets is pushing banks to get involved in the crypto space.

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