Cryptocurrency enthusiasts are steadfast in their belief that these emerging technologies could revolutionize the banking industry, and it is clear that large banks are becoming concerned.
In Bank of America’s annual 10-K SEC report, the bank cited risks saying, "Clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies," This increased competition may "negatively affect our earnings" or affect "the willingness of our clients to do business with us."
In addition to claiming that cryptocurrencies could distract from traditional banking services, Bank of America also discussed new technologies in financial services, including cryptocurrencies, and said that they "could require substantial expenditures in order to adapt to evolving industry standards and consumer preferences.”
These words came on the heels of the widespread adoption of cryptocurrencies that occurred during 2017, where Bitcoin’s price rose from under $1,000 in January to over $19,000 11 months later in December. This dramatic price rise brought major media attention and encouraged many people to invest.
Even though many blockchain technologies have had the opportunity to showcase their usefulness over the past year, banks have still been hesitant to embrace them. Bank of America banned its wealth advisors from buying or recommending Bitcoin and other cryptocurrencies to their clients. They have also banned their customers from using credit cards to send funds to digital currency exchanges, like Coinbase.
In theory, blockchain technology is a threat to the banking industry, as its peer-to-peer nature eliminates the need for a bank, which currently acts as a middle man for transactions. Large banks, including Bank of America, clearly recognize this and have been quietly researching use-cases for blockchain technology. The company currently holds 70 patents on blockchain related technologies, as well as several more for digital wallets and other means of digital banking and commerce.
The increasing public awareness of the practicality of the blockchain and of cryptocurrencies has forced big banking to either attack these developments, or to embrace them. Although they have currently shown disdain for these technologies, we will see in the coming years whether or not they choose to embrace them.