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The Place for Cryptocurrency in Banking Today

| by Charlie Kelly | 0

The Place for Cryptocurrency in Banking Today

Cryptocurrencies get a lot of attention these days. Much of that attention is due to the volatility of the asset compared to other currencies. In other words, if I bought a bitcoin for $15,000 a couple years ago, could it be worth $45,000 today?

What is less apparent is how often cryptocurrencies are being used as a method of trade. How many people are using their cryptocurrency to buy a pizza or a new vehicle?

It is early Fall, which is the season for banker’s association conventions, and after attending multiple sessions by experts in cryptocurrency over the past few weeks, and reading quite a bit on the same topic, the bottom line for community bankers seems to be that currently (who knows what the future holds?), the cryptocurrency held by your customers is primarily as an asset, not a method of running transactions.

So, are your customers currently asking you to hold their crypto assets? Are they asking you to lend against the cryptocurrency that they currently hold on a crypto exchange? If your customers are asking these questions, then the volatility of the asset becomes your next concern. If I lend assuming the value of the bitcoin is $45,000, but then it drops significantly, how much of that can I consider an asset for the purposes of providing a loan?

If you are in wealth management, are your customers asking you to manage crypto assets on their behalf? Are they asking you to trade them on their behalf? This is a very real scenario for some wealth managers, but not all.

Cryptocurrency could certainly be an opportunity in the future, but we were not hearing from many bankers/customers that had actually been approached to lend or hold cryptocurrencies by their customers. Regulations and standards are being developed by agencies such as the SEC or the Federal Reserve, but most of that seems to be in progress, rather than real, concrete guidance.

It is not a bad idea to reach out to your customers and see if a need is out there, and if it is, if there is a solution you can provide. But, crypto, like other trends, might still be a “wait and see” area for bankers, unless your customers are really knocking down your doors in the hopes that you can help them with their crypto assets. If you want to talk further on crypto trends, contact Charlie to be featured on BankTalk Podcast.

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