Crypto as a validation for the emerging asset class



As banks move forward in crypto, it’s hard not to see this development as a validation of digital currencies and the world’s fastest growing new asset class. At least that’s conventional wisdom following a number of deals between vendors to bring bitcoin to banks, which would certainly expand the reach of cryptos.

The question is whether (and maybe when) customers will go beyond trading to go further into trading.

As reported on Wednesday, June 30, NCR and New York Digital Investment Group (NYDIG), a digital asset firm, are teaming up to help financial institutions (FIs) bring more crypto-related functionality in-house. In terms of mechanics, banks and credit unions (CU) will be able to couple crypto offers with NCR’s mobile application. This move would allow banks to bring crypto trading to end customers, where trading is traditionally done through exchanges. Regarding child care, this would be handled by NYDIG.

For banks, the possibility would be that customers get the crypto and keep it in accounts hosted within the FI – and the crypto, in turn, could be spent directly from those accounts. The estimated reach would be considerable: NCR and NYDIG said bitcoin activity will span 650 banks here in the United States, covering 24 million customers.

The move follows the announcement in May that FIS would work with NYDIG, also to allow bitcoin transactions (buy / sell / hold) through bank accounts.

Bitcoin and banking

There is a revealing statement in the FIS press release:

“Currently, consumers and businesses must set up new accounts, often with unregulated entities, and break out of their traditional banking relationships to acquire bitcoin,” FIS said. “The new solution leverages the advanced features of the FIS Digital One Mobile solution to enable banks to deliver bitcoin services through a seamless and easy-to-use digital experience, enabling them to generate commission income and better attract and retain customers. . “

The exchanges, of course, were a bit chaotic. In recent months, Coinbase has gone public with much fanfare. On the other side of the equation, the Binance crypto exchange was partly hampered by the UK financial authority, which said the company was not allowed to undertake “regulated activity” in that country. This seems to mean that crypto activity is confined to unregulated and unregistered avenues (i.e. it has been risky and will remain so).

The moves between banks and NYDIG here in the United States are a nod to the fact that exchanges have reaped the benefits of transaction fees – and banks, unsurprisingly, want to capture some of those revenue streams. Interestingly, NCR could provide child care at some point in the future, according to reports.

Recent research from PYMNTS confirms consumer interest in the use of cryptography in various contexts. According to a recent PYMNTS report produced in conjunction with BitPay, based on responses from 8,000 consumers, people want to own and use crypto to make transactions. About 18% of the adult population is likely to use crypto to purchase a good or service, which translates to 46 million consumers. Those who have used crypto in transactions have done so to buy everything from real estate to food delivery. In terms of familiarity, 12% of consumers own a crypto and 4.5% have owned it in the past.

This is a new opportunity for banks, which can take advantage of the confidence that has been built over decades. A separate study by PYMNTS showed that 98% of respondents expect a bank to provide three main things: a place to store their money, a way to save their money, and an easy way to physically access it. their money. Going more directly into crypto would meet these expectations. This would reduce the dependence of banks and consumers on stock exchanges, thus strengthening trust between consumers and FIs. Whether this inspires consumers to embrace bitcoin hand in hand remains to be seen.

Coming next week: the regulatory image of crypto exchanges and beyond

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About the study: The AI ​​In Focus: The Bank Technology Roadmap is a research-based and interview-based report examining how banks are using artificial intelligence and other advanced IT systems to improve credit risk management and other aspects of their operations. The Playbook is based on a survey of 100 banking executives and is part of a larger series assessing the potential of AI in finance, healthcare and other industries.



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