Banks Using Cryptocurrency in 2023: Trends and Challenges

Salomon Kisters

Apr 14, 2023

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Banks that use cryptocurrency are known as crypto-friendly banks or refer to financial institutions that have policies and practices that are favorable towards cryptocurrency transactions and related activities. These banks enable customers to engage in activities such as buying, selling, and holding cryptocurrencies, facilitating transactions with cryptocurrency exchanges, and providing other cryptocurrency-related services.

Additionally, some crypto-friendly banks may have partnerships with cryptocurrency companies or offer their own crypto-related products and services. It’s worth noting here that not all banks are supportive of digital currencies, and some may impose restrictions or bans on cryptocurrency-related activities.

For a long time, the majority of established organizations such as banks, corporations, and governments viewed cryptocurrencies and the blockchain with skepticism. Considering this phenomenon to be a fad created by computer nerds and tech aficionados, they desired to wait it out and anticipated that it would eventually fade away. Considering the continuous rise in the popularity of cryptocurrencies, this speculation by traditional banks is not even close to being accurate.

In this article, we have compiled a list of how many banks are using cryptocurrency in the year 2023.

The Big Banks

In 2021, when the crypto bull run was at its peak, 55% of the top 100 banks had some stake in the blockchain world, whether it be crypto assets or investments in blockchain-based companies. When the bull run ended, there was a general dumping of crypto assets, as is usually the case in a crypto bear market. This translated to falling prices and low investor confidence in the sector. However, this did not discourage banks.

Instead of investing directly in cryptocurrencies to profit from them, banks started focusing on individual projects in the blockchain industry. Of course, in return for their investments, they would receive a handsome amount of tokens. From 2021 to the end of 2022, at least 23 banks are known to have invested in the crypto world.

These included big names like Morgan Stanley, BNY Mellon, Citigroup, and United Overseas Bank. The following figures are derived from an analysis of the fundraising rounds of various blockchain startups and companies by banks.

• Morgan Stanley: $1,100M in 2 rounds
• Goldman Sachs: $698M in 5 rounds
• BNY Mellon: $690M in 3 rounds
• Commonwealth Bank of Australia: $421M in 4 rounds
• Citigroup: $215M in 6 rounds

The general outlook seems positive, but there is another side to it that paints a bleaker picture of the future of the crypto banking world.

It’s Not All Sunshine and Roses!

In March 2023, three of the most crypto-friendly banks in the world announced bankruptcy and will be liquidating soon. Silvergate Capital went down on Wednesday in the second week of March, announcing that it would be liquidating its assets. Similarly, Silicon Valley Bank collapsed on a Friday after investors withdrew more than 4.2 billion dollars, and Signature Bank was seized by regulators on Sunday evening.

When the crypto market crashed in 2022, not a lot of people saw it coming. These banks, which provided loans to startups, failed as a result of investors losing confidence in the cryptocurrency market. People withdrew their investments after the FTX exchange scandal, and the banks had to use the help of the Federal Government to pay back their clients. However, this alone was not enough, and the banks had to shut down as a result.

The problems in the crypto market began to surface first in the stablecoin sector, with the crash of LUNA and TerraUSD, and popular stablecoins like BUSD, USDC, and DAI losing their pegs after panic penetrated the market. This sentiment will likely continue, and unless other banks step in and reverse the situation, individual crypto firms and the industry in general will find it extremely difficult to find sources of liquidity in the market.

The crypto banking landscape has suddenly become quite uncertain, but industry experts believe that the vacuum created will soon be filled by banks willing to take on the challenge.

Top Personal Banks in the Crypto Industry

There are quite a few banks that cater to the needs of the average customer in the crypto market today. They might not be as big as the names we mentioned before, but they do their job quite well.

Revolut

Revolut has been offering crypto products since 2017, and more recently, it has worked hard to improve its services and made crypto a core part of its banking solutions. It allows you to purchase over 90 cryptocurrencies with more than 30 fiat currencies. It also offers a credit/debit card purchase facility with SWIFT and SEPA transfers enabled. Revolut also offers in-app crypto trading and staking features. It does not charge any deposit or withdrawal fees, making it a great all-in-one package. The only con is its trading fee, which is currently hovering at 1.5%.

Monzo

Monzo is a fully regulated UK bank that allows users to directly open an online account from their mobile phones. Monzo is more focused on traditional banking than Revolut; however, it allows users to purchase cryptocurrency from a wide range of crypto exchanges. Monzo is very customer-centered, keeping its account holders’ funds safe with FSCS protection and provides 24/7 customer support. The only downside is that, like traditional banks, it can sometimes block traditional as well as crypto transactions if there is a security threat.

Juno

Juno is both a cryptocurrency exchange and a financial technology company that offers banking services. It attempts to bring together the best of both worlds so that users can enjoy more options for banking, greater convenience and accessibility, and increased financial inclusion.

Just like a bank account, Juno comes with FDIC insurance, 2.15% APY on all your balances, and the ability to send direct deposits. Due to the fact that it is currently in beta, it deals in only the most common cryptocurrencies and lacks variety. To counter this, Juno offers an amazing rewards system, with 5% given on your cash deposits and 5% cashback on the purchase of your favorite brands.

SoFi

To start off, one of the best things about SoFi is that it gives you a reward (up to $100 in Bitcoin) when you start using the service. It allows you to trade Bitcoin, Ethereum, Dogecoin, Cardano, and 26 other coins.

Apart from crypto, SoFi also offers stocks, fractional shares, and ETFs. One of the major drawbacks of using SoFi, however, is that it uses a closed-loop system, which does not allow you to connect external wallets to the service. SoFi does this to improve its security and prevent fraud and theft. Conversely, as the platform continues to scale its systems, it is possible that the service will allow external wallets to connect in the future.

Fidor

Fidor does what SoFi cannot do yet; it allows users to connect third-party accounts with their main account without compromising on security. It also enjoys a great partnership with the cryptocurrency exchange Kraken that allows users to integrate their Kraken account with Fidor.

Fidor provides its users with a corporate account for investing in ICOs. If that isn’t enough, Fidor also offers transaction fees as low as 0.26%. The only thing that it lacks (for now) is the ability to stake your cryptocurrency, which you can easily do with its partner Kraken instead, so it isn’t that much of a problem.

Final thoughts

Cryptocurrency is a relatively new and rapidly evolving space, so it’s important to stay informed about regulatory changes and security risks associated with cryptocurrencies. Despite these challenges, many people see cryptocurrencies as an attractive investment opportunity, and banks can play an important role in facilitating these transactions. As cryptocurrencies continue to gain mainstream acceptance, more banks will likely become crypto-friendly in the future.

While the big institutions struggle to stay afloat amidst the financial crises in the crypto world, smaller banks are thriving since they are focusing on providing banking-integrated crypto services to the average users instead of going after tech startups and big money in the blockchain space.

Nevertheless, it is expected that average customers will also experience the effects of the cryptocurrency industry’s problems. As the confidence of big investors fails, the crypto market will see a definite downturn. Undeniably, this makes the future look quite uncertain for the overall crypto banking sector.

Conversely, the ball is now in the hands of blockchain companies - the more use cases they develop for crypto, the greater the likelihood of success in this turf. If there are more and more legitimate ways to utilize cryptocurrencies that are superior to fiat currencies, demand for cryptocurrencies will increase and the market will stabilize.

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