The legacy financial institutions have not only changed their tone towards cryptos, they are cozying up to them
Change is never easy and especially when you have to give up power and money — something that the big legacy financial institutions yield over all of us (the majority of not so rich). This is one of the primary reasons why the relationship between these traditional mortar & brick financial institutions and the emerging decentralized Cryptocurrencies has been an uneasy one, to say the least.
And when it comes to cryptocurrencies, Bitcoin has been the torchbearer of this decentralized movement, which is beginning to cause disruption at so many levels. Hard to believe that the premier crypto is already more than a decade old. Originally proposed as a peer-to-peer (P2P) digital payment system, it has gained a reputation as a store of value and a hedge against the macro-level economic risks that we encounter these days.
What a turnaround it has been for the digital assets in the last six months. Regarded as a failed experiment by the Main Street skeptics, cryptos have turned the tables around and that too in a meaningful way. The all-time price highs in the top two cryptos, Bitcoin and Ethereum, have been back been backed by some solid fundamentals — the former on a massive institutional interest & the latter owing to the Defi boom.
It’s nothing like the FOMO (Fear Of Missing Out) & amateurish euphoria that we witnessed towards the end of 2017. Even back then many like me, could see the impending digital disruption on the horizon. Although none could have predicted the momentum given to this revolution by the onset of the pandemic.
Although the institutional capital had been flowing into the premier digital asset since the beginning of the pandemic, the big lift for BTC came when PayPal announced back in Oct. 2020 that it would allow 350 million of its platform users to hold bitcoin and other virtual coins in its online wallet and shop using cryptocurrencies at the 26 million merchants on its network.
Then in December, 169-Year-Old MassMutual invested $100 Million in Bitcoin for its general investment fund. This was in addition to major players like MicroStrategy Inc., & Square Inc., who had expanded their investments in the world’s premier digital currency.
And if all of this was not enough to convince the Crypto antagonists, World’s largest asset manager, BlackRock, announced that it would give its clients the opportunity to explore investing in Bitcoin via its ‘BlackRock Strategic Income Opportunities’ and the ‘BlackRock Global Allocation Fund’. Ironically, it was only in 2018 that BlackRock CEO Larry Fink called bitcoin an “index of money laundering.”
And talking about a change of heart — how could I forget JPMorgan CEO Jamie Dimon who called bitcoin a “fraud” in 2017. Three years later, leading analysts at the same bank are now suggesting that Bitcoin could rise to $146K if it were to match Gold in terms of market capitalization. Really?
I am wondering then, why Big banks & Main street firms are now cozying up to something they called a fraud and a money laundering instrument just a few years ago — Oh wait, because big banks have been a harbinger of such activities themselves. While the data on cryptos suggests that less than 1% of the transactions account for illegal activities, some of the big global banks were at the front & center of money laundering of over $2 trillion recently — twice the market cap of Cryptos right now.
Not just that, billions of people still go unbanked around the world, and the ones that have access to these services have to pay high fees for that, and most importantly, everything is in control of these financial institutions. With the Cryptos, you have accessibility, security & control over your money. All they need is a smartphone and an internet connection. I think it’s time for these legacy financial institutions to either join the revolution or be left out in the dust. The choice is theirs.