From Resistance to Adaptation: What Caused These Big Banks to Accept Bitcoin

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Ever since cryptocurrencies began to dominate the public sphere during the boom in 2017 where Bitcoin jumped in price and reached $19,891.00, the regulatory situation surrounding blockchain and cryptocurrency projects can be described as murky at best. Around the world, since the advent of Bitcoin and other currencies, banks have been incredibly reluctant to work with the crypto world, generally, preferring to shut down cryptocurrency firms by banning them and their customers from making cryptocurrency based transactions.

Examples of this have appeared all over the world, on almost every continent. In the United Kingdom, cryptocurrency users are now expected to pay tax on their assets. That would be completely reasonable if it wasn’t for the fact that numerous cryptocurrency users in the country are complaining about their bank shutting down their accounts due to making transactions involving cryptocurrency. This has left numerous individuals with no choice but to set up new bank accounts because of their old ones being frozen, this has led to numerous people losing out on money.

These actions are being repeated all across the world by various banks. This includes institutions in China, Columbia, Chile, Ireland, India , Canada, and many other countries, with some instances even being in the United States.

Despite this, some institutions are looking to get ahead of the curve and are exploring ways in which they can adapt blockchain and cryptocurrencies to suit their business model. In this article, we will be exploring those businesses and why they are having a change of heart with cryptocurrencies.

JP Morgan, the banking juggernaut which was established as the Bank of the Manhattan Company in 1799 and changed their name in 2000, turned over revenue of $109 Billion in 2018. It is the kind of bank that you would imagine to be hostile towards cryptocurrencies. Despite this image, you would actually be incorrect in assuming this.

It was reported in February 2019 that JP Morgan would be the first major bank in the world to launch their own cryptographic token, that is being referred to as “JPM Coin”. This coin was created by engineers of the banking giant for a trial with the objective of offering an alternative method for clients to settle their payments in an instantaneous fashion. It has been said to be equal in value to the US Dollar.

This move was allegedly pushed forward so that JP Morgan would be better prepared for a potential future in which capitalism will be heavily underpinned by the use of blockchain technology. To successfully prepare, the financial institution needed to develop a method of moving currency with a method that can match the speeds of certain cryptocurrency transactions, rather than relying on the comparably slower method of wire transfers.

This move comes after a previous ban by JP Morgan, which prevented customers from completing cryptocurrency transactions by using credit cards. Despite the positivity of this move, the current users of this platform will be incredibly limited, with JP Morgans biggest and most regulated clients being able to make use of the service, with examples being banks, brokerages and other high-level institutions.

As it stands, there will be three different use-cases for the new project. Firstly, they will be tested as a replacement for wire transfers when payments are being made between international corporate clients. This should greatly decrease the time it takes for a payment to go live. The second use-case involves payments for investments, which the bank allowing instantaneous settlements of debt issuances by the use of their coin. Finally, it would be used in conjunction with JP Morgan’s treasury services brand for other businesses. This means a large amount of regulated money flow could be controlled through the JPM Coin.

Finance giant, Fidelity Investments is reported to be in the process of rolling out their own cryptocurrency trading platform in the very near future. This platform will also allegedly only focus on larger business customers and will not be focused on consumer use. The brand currently managed over $7 Trillion worth of assets worldwide.

Recently, Fidelity published the results of a recent survey which showed that corporate investors are becoming increasingly open to the idea of operating with digital assets. The results showed that 22% of the survey had already had some exposure to digital assets in their career and a further 40% would be comfortable with the idea of exploring digital assets in the future. This concludes with a majority of those surveyed thinking positively about the potential of digital tokens and currencies in the future.

A spokeswoman for Fidelity, Arlene Roberts delivered a quote to Bloomberg when questioned on the new platform. “We currently have a select set of clients we’re supporting on our platform. We will continue to roll out our services over the coming weeks and months based on our clients’ needs, jurisdictions, and other factors. Currently, our service offering is focused on Bitcoin.”

Despite the excitement that the venture is generating, this isn’t Fidelity’s first venture into the world of cryptos. In fact, earlier this year the company created their own cryptocurrency custody solution, even going so far as to hire a Head of Digital Assets from Barclays Bank in the UK.

The results of the survey and the creation of the platform are a perfect example of how more and more financial institutions are beginning to see the potential of cryptocurrencies and how they can be utilized to improve their brands and open themselves up to new customers.

Barclays Bank, based in the United Kingdom is a major player in the world of finance, with offices around the world and revenue of £21.163 Billion in 2018 (GBP). The British bank has expressed interest in getting involved in blockchain technology for some time, having filed for two blockchain-related patents in the United States.

Both of the patents are for designs relating to account security for its users. They also discussed the option of using blockchain technology to streamline their Know-Your-Customer procedures. This would be achieved by storing ID information on their own private blockchain. This would allow the bank to create an incredibly reliable verification process without creating a comparatively expensive system.

One of the biggest problem facing blockchain technology is managing growth and making sure that the system can still perform effectively as it grows. Barclays has proposed creating a high-level user authority which can bring information from old blocks onto newer ones, this could help to prevent issues of storage space and performance down the line.

The second patent discussed the potential of creating a blockchain to facilitate the transfer of digital currency from one account to another.

Late last year a research study that was commissioned by the Central Bank of Israel reached its conclusion. This study was analyzing the utility and feasibility of creating a national digital currency for Israel, which would have been dubbed the “Digital Shekel”. The result of the study did find that as it stands, the officially named Central Bank Digital Currency would not meet the needs of Israeli citizens and plans have been shelved for the time being.

Amongst the positives analyzed in the study was the fact that transactions by the proposed cryptocurrency would be able to occur instantly, eliminating the need for wire transfers and other slower methods of transferring money. Furthermore, another point raised by the study was that the additional tax revenue generated by the cryptocurrency would be beneficial to the government as this tax would then be able to be diverted back into the Israeli economy.

Despite the initial rejection of the proposal, the Bank of Israel has stated that the topic is likely to be revisited in the future. A statement was released, with the following being taken “The team does not recommend that the Bank of Israel issue digital currency in the near future. It is necessary to continue to examine the field and also follow the development around the world before there are proper grounds for a decision to recommend issuing digital currency”.

This may not seem like a victory in the short-term, however, this stance is in contrast to some other legal battles that have been occurring in Israel. For example, cryptocurrency exchange platform Bits of Gold has been involved in a legal battle with their banking provider Leumi due to the bank not allowing Bits of Gold to access their banking services, citing regulatory issues with cryptocurrency transactions. In the end, the Supreme Court of Israel has temporarily issued an injunction, preventing Leumi from stifling Bits of Gold’s banking activity.

The Central Bank’s willingness to explore the possibilities of a national cryptocurrency is a positive step in the right direction.

Initially, banks have tried to suppress blockchain technology and cryptocurrencies, dismissing them as an unsafe, technologically flawed bubble that will eventually burst and amount to nothing at all.

Once it became clear that this was not the case and that blockchain technology and cryptos were here to stay, some of the banks and financial institutions of the world realized that rather than fight with cryptocurrency firms in expensive lawsuits which anger the community, they should be changing with the times and attempting to adopt their own versions of cryptocurrencies and blockchain tech. This is so that if crypto enthusiasts prove correct and blockchain does change the face of the finance world, the big players can be ready and will be able to hit the ground running.

Alternatively, if cryptocurrencies do not take over the finance world and simply remains as an alternative option, the banks will be able to provide an additional service to cryptocurrency enthusiasts, thus maximizing their revenue by gaining additional customers. Either way, the largest financial institutions on the planet are beginning to take notice of cryptocurrencies and rather than resisting the movement, they are starting to adapt their own versions of various crypto services.