American Bankers Association encourages partnerships with crypto firms
A rather interesting report that has emerged could see the world of cryptocurrency be provided with a huge development, although whilst it could be potentially advantageous for much of the virtual currency community, it could be argued that it could become dangerous, as well. Of course, there are a variety of different crypto coins that have managed to benefit from being decentralised coins, which makes them incredibly different to traditional money forms that are accepted around the world, however the American Bankers’ Association (ABA) has decided that it could be in a financial institution’s best interests to consider teaming up in the future.
The report has suggested that banks should look to consider making partnerships with crypto firms due to the increased profitability and the client interest that the sector continues to experience, especially as coins such as Bitcoin continue to grow in value despite the coin’s valuation continuing to fluctuate.
Why is the ABA encouraging a partnership?
There are a number of advantages and benefits for banks who decide to strongly consider creating partnerships with crypto firms, despite the fact that there is still some resistance to virtual currency. Each of the reasons, though, could essentially help the financial institution to be able to generate even more income. For example, one such highlight is that if banks were to allow for payments via crypto to be made, they could then look to charge users a fee who do, as they currently do with debit and credit card transactions. Furthermore, they could look to earn additional revenue by lending it to customers, whilst also charging service fees for things including exchange trading, interest accounts and simply holding it via a digital wallet of their own.
Consumer demand suggests banks can capitalise
According to the 20-page report by the ABA, data has suggested that there would be a consumer demand for banks to be involved within the crypto sphere and that consumers would be more willing to use a financial institution to hold their assets for them. A recent survey by NYDIG, which is a crypto trading and custodial firm, found that a huge 80% of Bitcoin holders would move their Bitcoin to a bank if they had the possibility and opportunity to do so. This is great news for the banks, as they are looking to provide the best services for their consumers and are looking to build banking relationships as much as possible. The report also highlights that due to the increased profitability that the cryptocurrency industry is currently experiencing, there is a need from the crypto companies to use banks, as these will provide them with access to a payment system that can help onboard and offload fiat deposits.
Disadvantages that could be experienced
However, as mentioned, there are a number of potential disadvantages that could be potentially experienced as many of them pose a significant risk to the industry. Environmental factors that include the amount of energy used suggest that financial institutions that are looking to try and have an impact on climate change would be unable to get involved without having to alter their approach and potentially turn their back on a global issue. Decentralized Finance (DeFi) could also be a drawback as it will mean the crypto is not regulated like traditional forms of currency, which could then make it rather difficult for anyone to assume responsibility.