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The strange relationship between banks and cryptocurrencies

2019 marked a change of trend in the relationship between banks and cryptocurrencies

Historically, the attitude of traditional financial institutions towards these assets, which are new and different from those they have always been accustomed to dealing with, has been one of doubt and suspicion, if not distrust or even mistrust. 

For instance, it is well known that it has always been very difficult for companies working in the crypto sector to find banking partners willing to work with them, except under certain circumstances and in certain places, such as Switzerland, where concerns have been lower than average for some time. 

The first clear sign of this change in trend occurred at the beginning of the year when JP Morgan announced the release of its own digital currency, JPM Coin. The fact is that the same CEO of JP Morgan, Jamie Dimon, in September 2017 had bluntly defined bitcoin as “a fraud”. 

This net change in perspective, and especially in judgment, came at a time of particular difficulty in the price of bitcoin, seeing that after reaching an all-time high of about $20,000 at the end of 2017, it had plummeted to just over $3,000 in December 2018. 

So what had happened that made JP Morgan change its mind? It’s hard to say, however, in February 2019 the Nasdaq decided to list the liquidity indexes of Bitcoin and Ethereum, while the German BaFin authorised the first STO

So it was not a stand-alone decision of a single traditional financial institution, but a kind of change that affected the whole mainstream financial sector. 

In addition, in the following month, there began to be concrete talk of a possible Facebook cryptocurrency, and this news was able, over the course of the following months, to also bring cryptocurrencies to the masses. 

Indeed, in June, when the Libra whitepaper was published, the price of bitcoin reached highs not seen since January 2018. 

This Facebook project triggered a series of consequences that on the one hand drew enormous attention to cryptocurrencies from global financial authorities, but on the other, made it clear that traditional finance could not stay away. 

In fact, many banks had already started experimenting with blockchain-based tools, although not specifically the financial assets that run on them, such as BTC or ETH. 

But the main turning point was probably the interest of central banks, both in bitcoin and especially in the possibility of issuing digital currencies, the so-called CBDC (Central Bank Digital Currency). 

In particular, perhaps in response to the Facebook initiative, it was the Chinese central bank (PBoC) that made the greatest progress in this direction, even going so far as to announce the beginning of tests for its CBDC. The European Central Bank (ECB) followed shortly. 

At this point, the news released at the end of the year regarding trading or custody services for cryptocurrency offered by Swiss banks, and the decision of the German Parliament to authorise them also in Germany, did not come totally unexpected. 

While the traditional banking system’s attitude towards cryptocurrencies was still very hostile in 2017, something changed during 2018, and in 2019 it began to bear fruit. By now the initiatives of financial institutions concerning digital assets are numerous, and it is very difficult to imagine a further change of trend that could bring everything as it was before, especially considering the fact that they must have sensed that cryptocurrencies could represent an excellent opportunity for new business. 

In this regard, for example, Simone Billi, an Italian Lega politician, says: 

“It’s good that Italian banks are looking for new business, such as custody services for cryptocurrencies, in a sector, the banking sector, which has been in crisis for years. This will allow banks to increase their revenues without increasing their account expenses. However, the control by the authorities is important, so as to avoid abuse, especially in a sector that is still poorly regulated”.

Moreover, even bank clients themselves may be inclined to appreciate cryptocurrency services offered to them directly by the financial institutions. 

In this regard, Marco Amadori of Inbitcoin says:

“My stance is the same as a few years ago when I said that it was both inevitable and useful to many classes of people. Inevitable because classic financial institutions obviously want to expand their services into other markets that are vaguely related, and useful because not everyone wants to have the “money of the great” with the responsibility that comes with it. Why should I learn to manage my financial freedom when I don’t see the threats? (many of us obviously have a lot of answers to this question). I don’t want to be stereotypical but explanatory: if an old man has been managing his finances well for years with his long-time director at the local bank, why ask him to change his habits so he can have access to Bitcoin? Bitcoin doesn’t force everyone to become cypherpunk, it simply allows it.”

All in all, the wind in the banking industry has changed, and while it used to blow against cryptocurrencies, now it seems to be blowing in favour, albeit still with a lot of turbulence. 2019 has not yet been the year of total and definitive acceptance, but it was certainly the year of the change of trend, with the presumed end of hostilities, and, perhaps, the beginning of a more productive relationship. 

Marco Cavicchioli
Marco Cavicchioli
Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".