Most banks traditionally bypass the cryptocurrency side, preferring the motto:
"Blockchain – yes, cryptocurrency – no."
“This is extremely difficult. The legalized marijuana industry is going through far less difficult times than our cryptocurrency clients , ” said Joe Chiccolo, president of the BitAML Compliance Service Provider.
But while many giants "matured" only for the introduction of blockchain platforms, some players are no longer afraid to declare warm relations with crypto projects.
Silvergate Bank
On November 30, during the BlockFS conference in New York, Silvergate Bank CEO Alan Lane recalled the long way Silvergate was in the crypto space. Lane himself bought Bitcoin in 2013 and at that time his small bank at that time, located in San Diego, California, accepted the first crypto-client, the cryptocurrency exchange, which was a very bold step for a financial institution.
“These companies were, and they attracted funds from respected [venture] firms. They did nothing illegal, they did nothing immoral. And at the same time they really needed bank accounts. Therefore, I combined our need for deposits with their need for banking services , ” said Lane.
Today, Silvergate is one of the leading banks for American crypto startups. Over the years, Silvergate has narrowed its focus almost exclusively to the service of cryptocurrency exchanges, over-the-counter trading platforms and institutional investors.
Among the clients of Silvergate Bank are cryptocurrency exchanges :
In a report submitted on November 16 in the SEC, the bank reports that it is currently working with 483 crypto startups, whose deposits as of Q3 2018 were about $ 1.7 billion.
At the same time, Lane notes that the bank is extremely transparent in regulatory matters and obliges the CEO of cryptobirth to meet directly with bank regulators. Lane says that even in the early stages, he worked only with those start-ups that included legal expertise specialists from traditional finance who were responsible for compliance.
“The Compliance Director is not a multi-tasking person,” says Lane, noting that at that time the CEO of many crypto startups performed almost all the functions that normally should be distributed among team members.
The ability to track transactions in the blockchain allows Silvergate not to fear for involvement in illegal operations, often associated with cryptocurrencies. At an early stage, the bank introduced a monitoring system that links deposits made with the bitcoin blockchain data. A bank employee has the right to make quarterly inspections of stock exchanges, coming to their office and checking that they maintain a tracking system relevant.
“We wanted [we] to see both sides of the transaction. When you make a bank transfer of $ 50,000, send us the blockchain address … [on it] we want to see a transaction that matches the value of $ 50,000 , ”says Lane.
To create more customer-oriented communication and remain competitive, Silvergate is integrated into the Exchange API in such a way that institutional investors can trade or deposit instantly 24 hours a day. Including it is attractive from the point of view of urgent conclusions in Fiat, which, as noted by Lane, is important in the case of a hack exchange.
Morgan stanley
In September, Bloomberg, citing an informed source, said that Morgan Stanley plans to open trading in Bitcoin derivatives, joining other major players who are preparing to enter this space.
Investors will be able to open long and short positions using so-called return swaps , and the bank will charge a spread for each transaction. According to the source, Morgan Stanley is not going to trade Bitcoin directly, swaps will be tied to Bitcoin futures contracts.
Earlier this year, Morgan Stanley CEO James Gorman did say that the bank would not allow clients to trade cryptocurrencies directly, but would create a trading platform that would support various derivatives tied to digital assets.
In June, Morgan Stanley hired Andrew Peel to be the head of the digital asset markets (previously Peel worked at Credit Suisse Group AG as a derivatives trader, and from 2016 he served as vice president of sales and trading innovations, including cryptocurrency).
According to a Bloomberg source, from a technical point of view, the bank is already ready for swap-trading and will launch it with sufficient interest from institutional clients, after completing the internal process of approving a new type of transaction. The bank has not yet confirmed and denied the information received from Bloomberg.
Morgan Stanley also contributed to the research and analysis of the cryptocurrency market. The report titled “Bitcoin Decrypted: Fast Learning and Application”, released by the Morgan Stanley Research Department on October 31, shows that institutional clients are becoming more interested in cryptocurrencies, while interest from private traders is falling.
According to the document, the volume of cryptocurrency assets under the management of venture capital firms, hedge funds and private equity companies has gradually increased since the beginning of 2016 and today amounts to $ 7.11 billion.
The report analyzes the cryptocurrency market over the past 6 months. Particular attention is paid to Bitcoin: researchers believe that it is "improved and solves its problems." Dr. Zeynep Gurguk, a researcher at Imperial College London, believes that bitcoin can become a means of payment in the next decade, while noting that the first cryptocurrency still needs to solve problems related to scalability, regulation, volatility and privacy.
The researchers also analyzed the steakblockin niche, noting that the growth of such projects began at the end of 2017 and increased during this year. One of the observations of scientists suggests that today's fall of the crypto market has led to an increase in the share of Bitcoin in the volume of trading paired with the leading steakcocoin Tether . At the same time, scientists believe that not all stablebcoins will survive in the long term, and those with lower transaction costs, higher liquidity and a transparent regulatory structure have the advantage.
Sberbank
Sberbank of Russia is one of those who are cautious about building relationships with the crypto-space and are on the path to implementing blockchain platforms. On November 30, Reuters reported that Sberbank and the investment company Interros carried out a blockchain transaction, which was no longer the first for Sberbank. Companies have closed a so-called over-the-counter foreign exchange repo transaction, which is a sale of securities with an obligation to repurchase at a predetermined price.
Vice-President of Sberbank, Head of Global Markets Department, Andrey Shemetov, said that it was “a currency repo on the security of Eurobonds of a first-tier Russian issuer (it includes companies with the most successfully traded stocks . – DeCenter)”.
The agreements were entered into the blockchain platform of Sberbank based on Hyperledger Fabric using smart contracts and digital signatures. The volume of the transaction was not disclosed, but Shemetov approximately estimated the amount as corresponding to the average volume of the inter-dealer repo transaction. He noted that the transaction was not a test, but was a real financial contract.
According to Shemetov, the conclusion of repo transactions on the blockchain has a number of advantages compared to traditional over-the-counter transactions. The blockchain allows you to monitor real-time market conditions of a transaction, audit data on a bilateral basis and automate settlement and operational functions such as interest payments, margin call, clearing and repository.
“In the future, the conclusion of transactions through the blockchain platform will reduce transaction costs and errors through automation, as well as increase transparency and trust among all participants in the financial market ,” said Shemetov, suggesting that Sberbank might in future put such transactions on flow.
Metropolitan Bank
Another speaker at BlockFS was Nick Rosenberg, director of information technology at Metropolitan Bank in New York. He said that Metropolitan is also looking for cooperation with a wide range of crypto startups (in particular, Coinbase is among the bank’s crypto clients.
“We are definitely very interested in building this vertical. We realized that this is a serious industry. Some very intelligent people are involved. There are a number of very interesting ideas that can really change the way people do business , ” Rosenberg said this summer in a conversation with Coindesk. At the moment, the Metropolitan is already working with crypto-companies, providing the service of fiat deposits.
In a report to investors, the bank said that in the first quarter of 2018, commissions on transactions related to crypto clients amounted to $ 3.4 million. This increased the non-interest income of the bank by 300% compared with last year.
Fidelity
On October 15, financial service provider Fidelity Investments announced that it is launching the Fidelity Digital Asset Services platform for cryptocurrency trading and cryptocurrency storage. The platform will be available for corporate clients.
Fidelity plans to create a “scalable infrastructure” that will draw on the company's experience in creating such platforms in the traditional sector. During the launch phase, the platform will provide “institutional level storage”, access to trading and “specialized customer service”. It is known that at the early stage bitcoin and ether will be accepted for storage, as well as a number of other cryptocurrencies, which will be announced later.
Security will be provided through cold storage and "multi-level physical and cyber control."
The CEO and chairman of Fidelity Investments, Abigail Johnson, noted that the goal of the new platform is “to make native digital assets, such as Bitcoin, more accessible to investors.”
“Our efforts were crowned with success and helped us understand and improve our understanding of cryptocurrencies … Creating Fidelity Digital Assets is the first step in long-term plans for creating a corporate-level platform [providing] a full range of services for digital assets. Institutions tell us that in order to thoroughly engage in digital assets, we need a reliable platform provider to enter this space. These institutions need a high level of services and security, consistent with the experience to which they are accustomed to trading in stocks and bonds , ”said the head of the new division, Tom Jessup.
State street
State Street, one of the largest repositories for institutional investors, notes that customers are still not in a hurry to “deposit” their crypto assets, but there is an interest in digital assets.
“There is no sense of haste on the part of our clients [in the matter of] entering these assets right now. But when they do, we want to meet them there … There is a high level of interest, but there is no need for action, because none of our clients [asked us] to place these assets in the storage … We talk with clients who are interested in this and we look at it very carefully. But we do not declare that we are launching such a business. At the same time, we are a blockchain-friendly company, we are very involved in [this area] , ” said Jay Biancamano, Managing Director of State Street for Digital Product Development and Innovation at BlockFS conference.
Biancamano also spoke of the SEC position, saying that the commission calls on traditional providers to better understand the current state of affairs, and called it “refreshing.”
“It's not just about current cryptocurrencies, but also about tokenization and digitalization of traditional assets ,” said Biancamano.
Traditional financial companies that provide (or are preparing to provide) cryptocurrency storage services also include the American holding Northern Trust, the Japanese bank Nomura, the Canadian VersaBank, and the Australian Guardian Vaults repository.
