Amid results season, the CEOs of UBS, Bank of America (BofA), and China Renaissance expressed their views on Bitcoin, the cryptocurrency that has seen its price rise astronomically since the start of the year amid high investor demand.
Despite the CEOs all expressing enthusiasm about blockchain, the technology which underpins Bitcoin and which is seeing an increasing number of use cases evolve in the financial services industry, they nevertheless also expressed several concerns about the cryptocurrency itself.
The banks criticized Bitcoin both as a method of payment and as an asset class. UBS CEO Sergio Ermotti called out Bitcoin’s still-gray legal status, while Brian Moynihan, CEO of BofA, also said that the anonymity Bitcoin grants its users makes transactions hard to track, and therefore sometimes impossible to verify if they’re above board. This suggested that both banks are wary of dealing in Bitcoin because of the risk of falling afoul of anti-money laundering (AML) and know your customer (KYC) regulations. China Renaissance’s CEO Fan Bao, meanwhile, stated that Bitcoin is headed for a bubble, as more and more amateur investors pour money into the asset class.
Big banks will probably only reverse their position on Bitcoin following regulatory change. While we’re seeing smaller banks and a growing number of asset managers agreeing to give their clients exposure to Bitcoin, big banks will likely need much more convincing before they follow suit and begin rolling out Bitcoin services. What eventually persuades them to relax their stance on Bitcoin may have to come from the top down, for example if regulators in their markets under whose mandate they fall formally recognize Bitcoin as a form of payment, thereby giving their endorsement to the legality of the asset.
Nearly every global bank is experimenting with blockchain technology as they try to unleash the cost savings and operational efficiencies it promises to deliver.
Banks are exploring the technology in a number of ways, including through partnerships with fintechs, membership in global consortia, and via the building of their own in-house solutions.
- Outlines banks’ experiments with blockchain technology.
- Details blockchain projects at three major banks — UBS, Credit Suisse, and Banco Santander — based on in-depth interviews.
- Discusses the likely trends that will emerge in the technology over the next several years.
- Highlights the factors that will be critical to the success of banks implementing blockchain-based solutions.
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