In 2014, as regulators in New York were exploring ways to control Bitcoin, executives at Wall Street’s biggest banks fretted that regulating cryptocurrencies would also legitimize them — and that could threaten the finance industry.
At the World Economic Forum in Davos that year, Jamie Dimon, the chief executive of JPMorgan Chase, the nation’s largest bank, called Bitcoin a “terrible” store of value that was also being used for illicit purposes.
There are now more than 75 million users of Bitcoin, up from around three million seven years ago, and the number of digital currencies has exploded.
Their approach is two-pronged: experimenting with cryptocurrency offerings and lobbying regulators to create rules that work in the banks’ favor.
And the Federal Reserve, following in the footsteps of central banks around the world, is evaluating launching its own digital currency.
With the rise of secondary markets for loans, banks could lend even more against the deposits they had by selling the loans to investors after they were made and freeing space on their balance sheets to do more lending.
When Congress relaxed regulations in 1999 to let commercial banks enter the fray on Wall Street, their power increased again.
More recently, he declared it “worthless.” And three years ago, Bank of America’s chief executive, Brian Moynihan, barred the giant company’s wealth managers from putting any client money into cryptocurrency-related investments.
But some individual bankers were getting curious.
Last year, engineers at Bank of America filed the biggest number of patent applications in the bank’s history, including hundreds involving digital payments technologies.
Bank of New York Mellon and Northern Trust are working on offering custodial services to their clients — essentially bank accounts for other banks — that would hold Bitcoin.
In 2019, a unit of JPMorgan called Onyx introduced JPM Coin, a digital currency backed by the dollar that ran on Quorum, an internal technology that mimicked the structure of blockchain.
These transactions used to take more than a day to complete — hence the “overnight” label — but JPMorgan’s platform does them in just 15 minutes, reducing risk.
They worried that the movement of the coins around the financial system could cause a buildup of risk because they were tied to the dollar, sparking a panic and leading to the 21st century version of a bank run.
banking regulator, the Office of the Comptroller of the Currency, for feedback on its plans to launch a debit card program that gave customers rewards denominated in Bitcoin.
lawyers envisioned an almost endless list of problems. What if Quontic customers lost their Bitcoins? What if the bank account holding them was owned by a trust and not an individual person? How would they be divided if someone died? The deliberations took two years, and at the end there was no clear green light.
It chose to rely on an outside firm to handle everything related to Bitcoin so that Quontic would not actually have to “touch” the cryptocurrency.
Regulators, who were caught off-guard by the rapid adoption of cryptocurrencies, are scrambling to write new rules governing their use.
American banks are also taking a stand against the Federal Reserve’s exploration of its own digital currency.