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Institutional Crypto Adoption Grows, But Will Big Banks Make a Splash in 2019?

Last Updated March 4, 2021 3:17 PM
Melanie Kramer
Last Updated March 4, 2021 3:17 PM

A top executive in the PricewaterhouseCoopers (PWC) crypto division predicts that more institutional players will announce cryptocurrency projects this year.

Henri Arslanian  is fintech and crypto lead for PwC China and Hong Kong. He’s also the chairman of the FinTech Association of Hong Kong and a teacher of the first fintech university course in Asia.

Arslanian believes that despite regulatory uncertainty and a cryptocurrency bear market, more banks will enter the space in 2019. He notes that 2018 already saw many enter. “Some of them may decide to launch their own solutions,” he said.

Crypto Custody a Common Point of Entry

The crypto expert gives Fidelity Investments as an example of one 2018 cryptocurrency market entrant. It launched Fidelity Digital Asset Services LLC to trade cryptocurrencies and provide crypto-custody services for its institutional client base in October.

At the time, industry professionals came out in support of the move. Some commented that overcoming the custody hurdle for cryptocurrencies, and Fidelity’s confirmation of the new asset class, was a significant step for the industry.

In December, Fidelity revealed it would add more crypto-assets to its services and further invested alongside Nasdaq in the Wall Street cryptocurrency exchange ErisX.

Arslanian told Bloomberg that:

Others may try to partner with some of the other crypto firms a bit like Nomura did with Ledger, and others may try to invest in crypto companies a bit like Goldman did with BitGo and Circle.

Adding  elsewhere:

This is very good because it will bring the kind of level of institutional expertise and experience to the sector which is something the crypto industry needs.

Japanese holdings company Nomura partnered with hardware-wallet device maker Ledger in May, again to launch an institutional quality crypto-custody service.

Goldman led a near $60 billion funding round into startup crypto-custody service BitGo. The investment bank also backs over-the-counter and crypto-investment provider Circle in order to access the crypto-market.

An ex-Goldman Sachs head of electronic trading also believes 2019 will bring better things for cryptocurrency market.  Greg Tusar said:

There’s a lot of opportunity to build great businesses and have impact.

Indeed, Circle’s own CEO Jeremy Allaire made a vague price prediction in December — that in three years bitcoin is “certainly going to be worth a great deal more than it’s worth today. I am long in the market.”

Who Will Take the Leap?

bitcoin price diving board
Will a big bank make a splash in the crypto markets in 2019?

Institutional players have so far chosen what could be seen as a safer route to enter the cryptocurrency market. Many 2018 market entrants offer cryptocurrency custody solutions or back crypto startups. But, institutional exchanges like Switzerland’s SIX, are getting more directly into cryptocurrency trading. SIX this year became the first to be approved to offer a cryptocurrency-based exchange traded funded (ETF).

What 2019 needs is a large bank to really starting using a cryptocurrency — whether it’s one of their own like a central bank digital currency (CBDC) or an existing coin that they use to make significant transfers.

That said, many banks and financial institutions are laying the ground for future cryptocurrency use by investigation and adopting crypto’s underpinning blockchain technology.

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