Playing catch-up
Banks and asset managers must find ways to get in on the rising popularity of trades in cryptocurrency
It’s no stretch of the imagination to expect that you will soon be able to buy and sell bitcoin through your local bank.
Bitcoin, ethereum and other cryptocurrencies are usually traded in SA through exchanges such as Luno and Ice3x, but their spectacular rise through 2017 means they have become too mainstream for banks to ignore.
Offering virtual-currency broking services would be one way for financial institutions to ensure they are not usurped by the burgeoning shadow banking system. Innovative banks in other parts of the world are already testing the waters. Last year, Switzerland’s Falcon Private Bank said it would provide “blockchain asset management solutions” for its clients, allowing them to exchange and hold cryptocurrencies.
Local financial institutions — which punch above their weight when it comes to innovation — are no doubt considering their options.
“Banks getting involved is inevitable, and good for the crypto space — it should raise the bar on KYC [know your customer] type issues,” says Paul Mitchell, fintech and blockchain lead at PWC SA.
Cryptocurrency broking services by financial institutions “could definitely work”, he says.
“I’d be surprised if banks and progressive asset managers aren't already looking at it.”
This is partly because financial institutions are increasingly treating cryptocurrencies as a legitimate asset class. And being uncorrelated to other types of investments, and highly volatile, digital coin trading is attractive to some types of investors.
Anthony Grant, CEO of FNB Foreign Exchange, says more and more clients are asking the bank for information about cryptocurrencies and trading options.
FNB has been “carefully assessing the opportunities” and will only pursue “sustainable solutions” that will benefit clients. The bank has not made a decision to facilitate cryptocurrency trades between clients, according to Grant, who adds that FNB is keeping an eye on the regulatory environment and is providing input to industry bodies.