The Big Banks Are Coming For Bitcoin

Tyler Durden's picture

No matter what Jamie Dimon may say, bitcoin’s durability can be expressed by one simple fact: With a market cap of $100 billion, digital currencies have become too big for banks to ignore.

As Bloomberg recalls in a story about how banks are preparing to confront the thorny regulatory issues related to dealing in bitcoin and other digital currencies, on the same day Dimon trashed bitcoin, calling it a “fraud,” his firm’s private bank hosted a panel featuring cryptocurrency investors, and even helped some wealthy clients transact in a bitcoin exchange-traded product listed in Stockholm, raising questions about whether the bank violated its fiduciary duty in doing so.

Dimon isn’t the only one of his peers to harbor reservations about bitcoin. Bridgewater Associates’ Ray Dalio and BlackRock’s Larry Fink have criticized it as a “bubble” and a “a tool used by criminals.” Morgan Stanley CEO James Gorman defended bitcoin, arguing that it is “more than just a fad.”

But with clients demanding bitcoin exposure in greater numbers, banks have little choice but to assent to their demands, like JPM did. Goldman’s tentative embrace of bitcoin has so far also been the most ambitious, with the firm saying it is considering opening a bitcoin-trading business that would function like an interdealer broker for exchanges and large players.  

Two days ago, Goldman CEO Lloyd Blankfein tweeted that he’s still on the fence about bitcoin, and that he’s “not endorsing or rejecting” the digital currency.

But for banks hoping to enter the bitcoin business, many unanswered questions remain. For example, how do banks that are required by law to prevent money-laundering handle a currency that’s not issued by a government and that keeps its users anonymous?

According to Bloomberg, handling bitcoin would invite scrutiny from every major U.S. regulator, according to Joshua Satten, director of emerging technologies at Sapient Consulting.

“From the perspective of the U.S. Treasury, do you classify it as an asset class or a currency?” Satten said. “If banks are starting to manage and hold bitcoin for their clients, you would have the OCC and the FDIC looking at how they classify the assets on their balance sheet and how they state the assets for the portfolio of a client.”

However, the advent of cryptocurrency focused hedge funds like the $500 million crypto-focused fund being planned by Mike Novogratz means that banks risk falling behind their competitors if they hesitate.

Already, there are 75 funds investing in the space, according to Autonomous Research.

And that number will likely rise after the Chicago Board Options Exchange introduces bitcoin futures and options, which it says it’s planning on doing some time next year, making it easier for traditional investors to gain exposure to bitcoin.

Other potential applications for bitcoin that are being considered by banks include derivatives contracts and using the digital currency for trade finance, Bloomberg reported. For regulators considering how to move forward, Switzerland created a precedent over the summer when it granted a license to Falcon Bank to transact in bitcoin on behalf of its wealth-management clients.

However, while an endorsement by the banks would help cement bitcoin’s reputation as a legitimate asset, it could also bring changes as regulators demand more transparency. After all, the lack of transparency and the difficulty enforcing financial laws were both cited by the SEC as reasons for the rejecting two proposed bitcoin ETFs back in March.

Assuming US regulators assent to allowing banks to deal in bitcoin, the fundamental question then becomes: Will the banks change bitcoin? Or will bitcoin change the banks?

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Yellow_Snow's picture

Bitcoin coming to a bank near you...

BennyBoy's picture

 

Bitcoin is a “a tool used by criminals.”

Which is why these crooks want in.

crazytechnician's picture

Tell me something that criminal don't use: Cash , cars , clothes , houses , food , water , oxygen , ban them all I say.

ZorroHedge's picture

Goldbugs need to justify on why they missed out. 

crazytechnician's picture

They havn't missed out on anything yet. Maybe when bitcoin is into 6 or 7 digits , until then it's just their own ignorance and hatred that won't let them invest.

Gazooks's picture

hatred? really?

 

it's not investing in anything other than another control mechanism that will be utterly dominated by these 'players'

 

 

no hate, enjoy your servitude

Gaius Frakkin' Baltar's picture

"Will the banks change bitcoin? Or will bitcoin change the banks?"

Probably both.

A kind of Neo / Agent Smith sort of thing.

Gazooks's picture

not so bad

 

 

for a biker

MillionDollarButter's picture

If they want to damage it, they would either have to:

1.) Accumulate significant reserves of bitcoin, or

2.) Create a bitcoin futures instrument

They personally haven't done 2 yet, and it might initially backfire by lending credibility to it.

mmanvil74's picture

Banks "embracing" Bitcoin is akin to the New York Times embracing the Internet and publishing news online - as much as they don't want to, they have to.

Mementoil's picture

Technically speaking, Bitcoin is still in a precarious position.
It has broken down from a rising wedge formation, and right now it is retesting it from below.
If it fails to break through it will drop significantly.
And all this is happening in the broader context of a H&S top that has not been resolved yet.

As I said before, BTC needs to exceed 5000$ in order to insure another leg up.
And if it doesn't do that soon - it's toast!

VD's picture

silly person, bitcoin doesn't "trade" on fundamentals nor technicals. you are hoodwinked by NSAcoins.

 

Golden Phoenix's picture

You've said that before and you're still right.

JRobby's picture

Why does this article state that money is issued by government?

Why do banks want to be in bitcoin suddenly? There is an upside obviously but is it a short term or long term play?

 

ZorroHedge's picture

Lol. What are you investing in ? Everything you own is controlled by them even the food you eat. You are still not aware that gold is also in their control ? Check on youtube for an interview about Bitcoin from Jamie Dimon in 2015. His hatred and violence against Bitcoin was so big that he almost summoned the Devil.

ZorroHedge's picture

Of course they missed out. More than 1000 % on Bitcoin, more than 4000 % on Ethereum, more than 3000 % on Ripple, ... The top 10 coins have gone parabolic already. Sure, they can still go up more but the first 1000s % of gains they missed. They were too busy bashing Bitcoin and saying that only gold and silver are real money. Repeating every day the same stupid shit of why Bitcoin is crap. And many still didn't learn their lesson. They keep holding on to their stupidity until the day the crypto bubble pops so they can say: "I told you so.". That's what they are waiting for. Just admitting that they were wrong is too difficult for them. Their ego is too big. They prefer to buy even more depreciating gold and silver and ignore the only asset class that keeps bankers awake at night. Human stupidity has no limits.

secretargentman's picture

Why the HELL would anyone have a bank hold or manage their bitcoin for them? That would be like having your wife manage the PI you hired to investigate her boyfriend. 

Theosebes Goodfellow's picture

~"Why the HELL would anyone have a bank hold or manage their bitcoin for them?"~

Now Secret A, Stop that talk right now. You hear me? Knock off that "making sense" stuff this minute!

ZorroHedge's picture

I am not pro bank management of Bitcoin. You don't need a bank for investing in Bitcoin. You can buy Bitcoin on an exchange and then send it to your private hardware wallet so you have your Bitcoin in your hand.

HungryPorkChop's picture

Some of these coins are still ramping!  Ehtereum Dark ETHD ramped from $0.70 to over $4.00 in the past month.  That's over a 500% return in less than 30 days. 

JRobby's picture

Gold, PM's can be shorted and manipulated in a number of ways and is since it is a competing "currency" is under continuous attack by CB's.

The banks can't short Crypto's so all they can do is buy and dump for now. That will not work for long.

yogibear's picture

Especially criminal banksters.

abyssinian's picture

Bitcoin kills all the banks.  

hestroy's picture

Only if they would buy it. I wish they would.

USisCorrupt's picture

They are already, the price will soon explode much higher.

Rapunzal's picture

It doesn't matter whatever those criminal bankers think or do, everything they touch will turn to shit. Can we get all banking CEOs on an island and let them doing gods work. At least they are no harm to society anymore.

Juliette's picture

There are already ETNs on Bitcoin which can be traded with a regular US stock account. You don't have to be a client of an expensive Swiss private bank to do it.

What is an ETN? Exchange Traded Notes (ETN) are basically the same thing as an ETF (Exchange Traded Fund), just less regulated, but you don't need to care about that. The only thing that is important is that their price always mirrors the price of Bitcoin 1:1 ...

I already bought some, execution is instant, liquidity is high, no problems buying or selling anytime. They are traded only on 5 days of the week, however, and price is adjusted prior to the opening of the session on Monday (at the NASDAQ OMX Nordic Exchange in Stockholm, Sweden).

ETN name: Bitcoin Tracker One XBT Provider

ISIN: SE0007126024

Link - http://www.nasdaqomxnordic.com/etp/etn/etninfo?Instrument=SSE109538

SeuMadruga's picture

It seems banks are also aiming at rigging crypto's markets through derivatives as they've done with pm's.

Time will tell if this "dog" will accept to be wagged by its own futures "tail"...

pc_babe's picture

What the govt. one day giveth, the govt. one day taketh away. Capricious folly

dark fiber's picture

Brace yourselves, here comes the hammer.

NaiLib's picture

us banks already behind Switzerland.

Greenspazm's picture

Buttcon is not and never was a coin, in spite of the fraudulent advertising representations as golden discs. Buttcon will remain a valueless collection of digital nothings until backed either by tangible assets or government force.

Ask "Sastoshi Nakamoto", author of that famous white paper published on Halloween 2008 (if you can find his/her/its/their e-mail address and phone number, that is).

ZorroHedge's picture

Stop posting crap, Butthead.

Greenspazm's picture

Thank you for that highly articulate contribution. So explain to me why this set of digits is "worth" $4000

5HpHagT65TZzG1PH3CSu63k8DbpvD8s5ip4nEB3kEsreDan2uta

crazytechnician's picture

That private key hold's zero value. Now PM me one that actually has something I can buy me a boat with :)

DjangoCat's picture

"Buttcon will remain a valueless collection of digital nothings until backed either by tangible assets or government force...."

Backing with tangible assets is an invitation to fraud.  Is the gold in Fort Knox?  Why no public audit? 

Does fractional reserve banking encourage backing with tangible assets, or its opposite?

How about Tether, a crypto supposedly backed by USD reserves?  How did its market cap climb by several hundred million after the banks closed off deposits into their fund?

Now, government force is a different story.  I prefer to live where the force is weak.  I feel sorry for you if you think that force is an appropriate solution.



buzzsaw99's picture

a tool used by criminals? srsly?  how many crimes have jpm & gs committed?  i guess they hate competition.  earth to bankers, the reason crypto is so popular is because they are trying to get away FROM YOU.

Bollockinell's picture

"a tool used by criminals?"

Because before the advent of Bitcoin criminals never transacted in cash, gold, diamonds, etc. :)
The criminals use Bitcoin argument is so pathetic I'm amazed anyone purporting to own a brain can even utter such a ridiculous premise.

indygo55's picture

One thing they fear is the potential loss of fees and commissions in transactions. Bond and loan issuances can be done on the blockchain for the cost of legal which is greatly reduced. Thats a big chunk of their earnings. The skim. 

crazytechnician's picture

If they want their tx fee skim they should get into industrial scale mining.

2banana's picture

A market cap of $100 billion???

Based on WHAT?  The "value" of computers solving mathematical problems...

 

BAHAHAHAHAHAHAHAHAHA!

ZorroHedge's picture

Wow. I didn't know such clueless people actually existed.

2banana's picture

Why not a market cap of $200 billion?

Or $1 trillion?  Or googleplex?

If you are going to make up currency out of nothing - there is no basis of the worth. 

Now you can argue the market cap is what SPECUALTORS will pay for it.

Just like tulips.

 

 

breaktwister's picture

You should apply your comments to the USD or any other fiat currency and then you will realise why Bitcoin has value.

2banana's picture

The USD.  While now only Fiat, it has...

A three trillion dollar economy behind it.

The most lethal military in the history of the world behind it.

Bitcoin - it has "blockchain" technology!  As seen on TV!

 

Golden Phoenix's picture

>Fiat is good because people are forced to use it at gunpoint worldwide. Bitcoin is bad because people around the world want to use it.

I saw what you did there Agent Smith.