There is a lot of evidence suggesting banks are reversing their stand on crypto currencies. Major banks like Goldman Sachs, Citibank, and Bank of America are developing support services for trading, storing, and using cryptocurrencies. A study by IBM and the Official Monetary and Financial Institutions Forum (OMFIF) shows that a majority of financial institutions surveyed supported Central Bank-issued Digital Currencies (CBDCs). And, both Visa and MasterCard made headlines for their public support and investment into crypto currencies and associated technologies. However, there are alternate motives to this eventual change of opinion towards crypto.
Major banks like JP Morgan, UBS, and Deustche Bank have been major critics of Bitcoin and cryptocurrencies. Some going as far as calling it a scam and a bubble. However, all along they work hard behind the scenes to construct their own version of Bitcoin. The R3 consortium led by JP Morgan set out to create a private blockchain called Corda but had little success. So, JP Morgan left the group to develop one independently called “Quora”. Nevertheless, the rest of the banks continued their work and their effort is about to get a boost as R3 is partnering with IBM’s Hyperledger. In the meantime Citibank and Bank of America are focusing their attention on building exchanges and developing Custody services for an expected Bitcoin ETF. And now, Goldman Sachs in cooperation with Circle, Coinbase, and Bitmain launched the new USDC stablecoin.
These are cryptocurrencies whose value is pegged to an asset but most commonly to the US Dollar. They are kept stable through a fiat reserve equal to the amount of coins issued, a credit system, or a stabilising algorithm. USDT (Tether) is the top stable coin in the market today.
They represent another dimension of the crypto ecosystem and a newfound opportunity for banks to gain a foothold in the crypto market. Following in the wake of banks, credit companies are also getting in the action.
Visa’s CEO Al Kelly said in a recent interview that if the crypto market becomes anything like a fiat market, his company will follow it. In August 2017, Visa filed a patent for a business-to-business connection platform and MasterCard has filed two crypto-related patents this year alone. It seems likely that both of these companies are trying to catch up with their competitors in the crypto market. PundiX is the leading crypto point of sales terminal company in Asia, and Square, Inc. Square has filed patents to integrate crypto into their platform, as well as cold storage.
The banks have been following the crypto market closely and recognize its potential for profit and longevity. They are beginning to understand its ability to generate interest, innovation, utility, and investment. Nevertheless, they are cautious not to say anything overtly positive about Bitcoin that might make their investors and shareholders nervous. So, they walk a fine line between denial and acceptance of crypto currencies.
They realize they cannot beat Bitcoin or denounced it out of existence, therefore, their strategy is to control it. They have been quietly but heavily investing into crypto start ups, exchanges, and now stablecoins. This way they diversify their position inside the market by owning service providers, profiting from trading fees, and owning crypto currencies directly.
Their intent is no less than gaining complete control and direction of the market. For example, by owning a exchange, they can list or delist coins with favorable or negative interests towards the banks. A stake in a company like EOS would give banks a voice into their consensus mechanism and decide on the development of future Daaps.
And, owning stablecoins will give them the ability to control circulation, volume, and account access. Lastly, gaining custody services will give the banks the ability to store all crypto and use their fiat to settle transactions. In other words, the banks will “store” crypto out of existance and use cash to trade virtual partitions of it.