For a long time, financial institutions have resisted the new types of digital currencies and emphasised their risks. However, according to the former CEO of Citigroup, banks will no longer be able to ignore the crypto trend.

But have they really ever truly ignored it, or was it just a charade?

– Banks initially not very enthusiastic about Bitcoin & Co.

– Former Citigroup CEO sees crypto trend as unstoppable

– US authorities announce further clarity on digital asset regulation

It should come as little surprise that financial institutions such as banks or wealth management firms were initially unenthusiastic about the idea of cryptocurrencies. After all, the declared goal of digital currencies is to enable a borderless, immediate, secure and cheap transfer of payments, in which the forgery-proof and transparent blockchain replace a (trustworthy) financial institution. Banks as intermediaries would accordingly become de facto superfluous.

Jamie Dimon: well-known Bitcoin fudster

Accordingly, it is little wonder that the initial reaction of bank representatives to the emergence of Bitcoin & Co. was initially dismissive. A well-known example of this is JPMorgan CEO Jamie Dimon, who in recent years never tired of emphasising that Bitcoin was a “terrible” investment and that cryptocurrencies were not real currencies because they had no intrinsic value. He even threatened his employees with dismissal if they invested in cryptos. 

Anyone with eyes, ears and a brain should have realised that the whole thing was ridiculous, absurd and a charade. Those who saw through Dimon’s game invested against the trend and are now much wealthier as a result. 

But despite the allegedly negative attitude of its own boss, the US investment bank JPMorgan has now established itself as a pioneer in crypto. For example, the financial house has had its own blockchain-based platform, called Onyx, since 2020. It has already launched its own digital currency, the JPM Coin, which is pegged to the US dollar and can be used internally within the system.

Furthermore, like many other heavyweights a la Goldman Sachs, Citi and co, the bank is building crypto custody services for institutions and retail investors. Now isn’t that great? You, me and every person can buy digital assets that we were able to buy already years ago with big banks soon – for a nice premium, of course…

EX-Citi CEO believes crypto trend is unstoppable

So we are already seeing a change in the world of finance, one that is likely to accelerate in the near future, according to ex-Citigroup CEO Vikram Pandit. For instance, during the Singapore Fintech Festival, the Orogen Group CEO predicted to Bloomberg that in “one to three years, every major bank and/or securities firm will be actively thinking ‘shouldn’t I trade and sell crypto assets?'”

In his opinion, the traditional banking system is outdated and trying to modernise a paper-based system is “cumbersome” and would lead to unnecessary costs. For this reason, he hopes that “central banks around the world will understand the benefits of a central bank digital currency and move to accept and use it”.

As Bloomberg reports, Pandit himself is invested in crypto companies Coinbase and Alchemy Insights.

US authorities announce clearer regulation of cryptocurrencies

The Federal Reserve recently issued a joint statement with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency announcing next steps in cryptocurrency regulation to provide greater clarity in the fledgling sector and better guidance to banks on how to use cryptocurrencies in the coming year. The aim of the guidelines officially is to protect consumers and encourage banks to act responsibly.

Specifying the regulatory requirements for trading cryptocurrencies should provide banks with an important compass on dealing with and capitalising on the digital assets space. Here, too, more clarity should lead to greater interest for financial institutions, but also for blockchain companies based in or transacting in the USA.

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