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
