Banks fall behind as crypto exchanges take the largest share of the market. The BIS considers that traditional financial institutions offer a better Bitcoin trading service.

The ecosystem of Bitcoin (BTC) and other cryptocurrencies arouses growing interest from retail and institutional investors. For that reason, the Bank for International Settlements (BIS) estimates that banks may be falling behind.

Analysts from the Monetary Economics department of the BIS recently published a report titled Banking in the Shadow of Bitcoin? They discuss the impact of the exponential expansion of the Bitcoin-linked industry in the financial sector, particularly in banks.

The study indicates that cryptocurrency-related services offered by the world’s leading banks remain at very modest levels.

The Basel Committee on Banking Supervision (BCBS) is a global organization that brings together banking supervisory authorities. In late 2020, they found that Bitcoin-linked services offered by banks reached just USD 188 million.

The BCBS had collected such data on bank exposure to Bitcoin since 2018, before which they had very little information. Only 7 of the 178 banks that participated in that compilation reported their offer of services with cryptocurrencies.

The data from the BCBS includes a world map showing the geographic location of banks that offer Bitcoin services. Most of those financial institutions are in North America, Central Europe, and South Korea.

The other banks included in the study claimed that they did not offer cryptocurrency services. They are in Latin America (Argentina, Brazil, and Mexico), southern Africa, much of Europe, and southeast Asia.

Current regulations in those latter countries prevent most banking institutions from adding services with Bitcoin. The Central Bank of Argentina recently forced the banks Brubank and Galicia to suspend their new cryptocurrency products.

Banks Need Bitcoin to Innovate

The researchers from the BIS acknowledge in their report that banks need to take on more exposure to Bitcoin. That would allow them to have a greater capacity for innovation and increase financial inclusion.

Decentralized finance (DeFi) and the cryptocurrency market attract even more users. That has led many large and old banks to include crypto assets on their platforms to keep their customers.

In 2021, Deutsche Bank, the largest bank in Germany, announced that it would provide a cryptocurrency trading and custody service. The oldest financial institution in the United States, New York Mellon, made the same offer earlier that year.

The Swiss subsidiary of the Spanish bank BBVA joins the list, as it has offered a 100% digital investment account since late December. They target clients who want to invest in Bitcoin and Ether (ETH) in more than 30 nations.

The report by BIS notes that the few banks with exposure to Bitcoin have capital of more than EUR 3 billion.

Despite the above advances, the analysts from the BIS highlighted that the main activities with cryptocurrencies concentrate on exchanges. Those companies serve most retail and institutional clients interested in Bitcoin, operating with very light regulation.

By Alexander Salazar

Amid the Terra ecosystem’s problems, the legal team that brought legal support to the project left their positions. The lawful process gets led by an external lawyer backing up Terraform Labs during all the struggles derived from the crash of its two digital currencies.

What happened with Terra and its space’s digital assets has harmed investors who have lost their investment for the simple fact of owning UST and LUNA funds. This situation also seriously damaged Terraform Labs, as recent events have also caused essential team members to abandon the entity during its current struggles.

The internal legal team of Terraform Labs, a group responsible for giving legal advice and approach to the Terra work team, resigned from its position shortly after the algorithmic stable coin of the ecosystem crashed down and approached the lowest values.

The legal team Abandoned Terraform Labs

This information came from an internal source linked with what happened; highlighting that the legal team members had abandoned their positions, which is why the legal conflicts are now at an external lawyer’s hands.

The information highlighted by the source got confirmed by reviewing the LinkedIn profiles of the former members of the legal wing of Terraform Labs. Therefore, Marc Godich, Lawernce Florio, and Noah Axler have already made the respective changes in their accounts on the social network and reported who stopped working for the Terra ecosystem this month.

Let’s keep in mind that Terraform Labs is the entity created by Do Kwon and Daniel Shin in 2018, responsible for encouraging the development of the Terra Blockchain space.

The Chaos Reign in Terra

The Terra ecosystem recently became the subject of discussions within the crypto environment after the fall of its two main digital assets, the native token LUNA and the stable coin UST, the latter being more impactful for carrying out its activities under an algorithmic archetype. The currencies completely lose parity with the US dollar to crash down to lows near USD 0.11 per unit.

Even though the top team of Terra worked hard to reverse the incident and chose to sell a good part of the bitcoins that they had in their reserve, unfortunately, LUNA and UST did not react favorably amid the collective fear that invaded the market. It is important to highlight that this crash also impacted most of the leading exponents of the crypto ecosystem, which registered losses of more than 50% concerning their historical maximums.

Currently, the founder of Terra, Do Kwon, proposed to the community the possibility of making a Hard Fork and forking the network, which would create a new version that dispenses with UST and distributes the governance of the protocol among all users of the network. This alternative also states that the original version of the Blockchain will remain active but will now become Terra Classic.

By: Jenson Nuñez

Novogratz highlighted that Galaxy Digital also felt the weight of what happened with the Terra ecosystem, especially since they got listed as investors in the project at the end of 2020.

The famous CEO of Galaxy Digital, Mike Novogratz, spoke about the situation of Terra space and highlighted that as well as many affected, both he and his entity got hit by the fall of UST and LUNA prices.

Novogratz Shares his Thoughts about the Fall of Terra

Novogratz’s statements happened in a letter specially sent to the shareholders of Galaxy Digital. He contextualized the situation under which the entity invested in Terra and the disastrous events.

Novogratz expressed no good news about what happened in the markets or the Terra ecosystem. In LUNA and UST alone, $40 billion of market value got destroyed quickly. Both large and small investors watched how all the profits and investments vanished in front of their eyes. The collapse dented confidence in digital assets and Defi. Every time money gets lost in fashion; people seek the truth about what happened there.

Galaxy Digital invested capital in Terra and its tokens during the last quarter of 2020. Novogratz highlighted that the entity had shown interest in financing the project due to the terms of the payments.

A Difficult Macroeconomic Panorama

Another aspect that Novogratz referred to is that the situation of Terra took effect amid a macroeconomic context that was quite harmful to the financial world, so LUNA and UST got significantly impacted by conditions even outside the digital asset sector.

Novogratz also spoke about the decline in the prices of traditional assets since the beginning of 2022, added to the inflationary scenario that is harming many economies worldwide, and the measures the central banks accepted to manage these situations.

The Way to Follow

Novogratz also highlighted that this situation with Terra and the macroeconomic scenario does not imply the possibility of a sudden recovery of the crypto market. This situation will require reflecting on what happened and wait for the foundations to be available for a more organic evolution, which first goes through recovery and confidence in this sector.

Novogratz’s statements take place amid the debate that the Terra ecosystem is experiencing internally to decide its future since the vote to determine if the network gets forked.

By: Jenson Nuñez