How TradFis can drive growth by embracing digital assets
Some TradFis have internally debunked these beliefs and begun to craft digital asset strategies that leverage existing strengths and position their businesses for growth. Examples of how early movers are approaching the market include:
1. Being a digital asset custodian
Bank of New York Mellon (BNYM) is creating a multi-asset and digital custody platform for the transfer, safekeeping and issuance of digital assets.¹⁵ Custody is a core business for BNYM, and as digital assets become more widely held, customers are demanding custody solutions, making it a natural fit.
2. Enabling crypto purchases
PayPal has partnered with Paxos to allow its customers to buy, hold and sell bitcoin, Ethereum and other cryptocurrencies through their digital wallets.¹⁶ The relationship promises to raise the profile of cryptocurrencies and accelerate adoption.
3. Facilitating crypto investments
Wells Fargo is among several banks offering bitcoin investments through a partnership with NYDIG.¹⁷ The bank receives placement and servicing fees for referrals to NYDIG.
4. Processing payments
JPMorgan Chase recently announced that it will team with Singapore’s DBS Group and Temasek to form a blockchain payments platform in a bid to ease cross-border payments, trade and currency settlements.¹⁸ The newly established technology company, Partior, will leverage blockchain technology and digitize M1 commercial money. The platform will develop wholesale payment rails based on digitized commercial bank money to enable “atomic” or instantaneous settlement for various kinds of financial transactions.
5. Offering crypto rewards
Mastercard has partnered with Gemini, a cryptocurrency platform, on a credit card that offers real-time crypto rewards on purchases made with bitcoin or other cryptocurrencies.¹⁹ Customers can benefit from any appreciation in the value of their currency holdings.
6. Reimagining trade finance
Commerzbank, Isbank and LBBW became the first banks to execute a commercial cross-border transaction via Marco Polo, a distributed ledger technology-enabled trade finance network.²⁰ The partnership leverages DeFi technology to enhance the efficiency and security of supply chain management and trade financing solutions.
A future-back approach to jump-start digital asset strategies
TradFis that have found success in the digital asset space have embraced systematic, future-back approaches to strategy building centered on four key actions:
Show references#Hide references
¹ NYDIG Survey: Banking + Bitcoin, January 2021, NYDIG website, https://nydig.com/research/nydig-bitcoin-banking-survey, accessed December 2021.
² “The World’s Cryptocurrency Is Now Worth More Than $3 Trillion,” Time, November 8, 2021.
³ “In Global First, El Salvador Adopts Bitcoin as Currency,” The New York Times, September 7, 2021.
⁴ “About 80% of Central Banks Are Exploring CBDC Use Cases, Bison Trails Report Says,” CoinDesk, May 19, 2021.
⁵ “Framework for ‘Investment Contract’ analysis of digital assets,” U.S. Securities and Exchange Commission website, https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets, accessed December 2021.
⁶ “Stablecoins in Spotlight as U.S. Begins to Lay Ground for Rules on Cryptocurrencies,” The Wall Street Journal website, https://www.wsj.com/articles/stablecoins-in-spotlight-as-u-s-begins-to-lay-ground-for-rules-on-cryptocurrencies-11632562202?mod=hp_lead_pos3, accessed December 2021.
⁷ “State Of Blockchain Q3’21 Report,” CB Insights website, https://www.cbinsights.com/research/report/blockchain-trends-q3-2021/, accessed December 2021.
⁸ “Rise of the central bank digital currencies: drivers, approaches and technologies,” BIS Working Papers No 880, Bank for International Settlements, August 2020, https://www.bis.org/publ/work880.pdf.
⁹ NYDIG Survey: Financial Advisors + Bitcoin, March 2020, NYDIG website, https://nydig.com/research/nydig-financial-advisors-bitcoin-survey, accessed December 2021.
¹⁰ “HBS Survey Finds One-Third of Small Businesses Accept Cryptocurrency,” BusinessWire website, https://www.businesswire.com/news/home/20200115005482/en/HSB-Survey-Finds-One-Third-Small-Businesses-Accept, accessed December 2021.
¹¹ “How GoCrypto-Binance Pay Alliance Could Boost Crypto’s Mass Adoption,” BeInCrypto website, https://beincrypto.com/how-gocrypto-binance-pay-alliance-could-boost-cryptos-mass-adoption/, accessed December 2021.
¹² “Mastercard and Bakkt partner to offer innovative crypto and loyalty solutions,” Mastercard website, https://www.mastercard.com/news/press/2021/october/mastercard-and-bakkt-partner-to-offer-innovative-crypto-and-loyalty-solutions/, accessed December 2021.
¹³ “Six Reasons Why Ethereum Has Intrinsic Value,” CME Group, Reuters website, https://www.reuters.com/article/sponsored/ethereum-instrinsic-value, accessed December 2021.
¹⁴ “Visa’s Active Crypto Partnerships Reaches 50 Firms,” Tokenhell website, https://tokenhell.com/visas-active-crypto-partnerships-reaches-50/, accessed December 2021.
¹⁵ “BNY Mellon Forms New Digital Assets Unit to Build Industry’s First Multi-Asset Digital Platform,” BNY Mellon website, https://www.bnymellon.com/us/en/about-us/newsroom/press-release/bny-mellon-forms-new-digital-assets-unit-to-build-industrypercent27s-first-multi-asset-digital-platform-130169.html, accessed December 2021.
¹⁶ “PayPal & Paxos Bring Crypto to Millions of Users,” Paxos website, https://paxos.com/2020/10/21/paypal-paxos-bring-crypto-to-millions-of-users/, accessed December 2021.
¹⁷ “NYDIG and Wells Fargo partner to launch bitcoin funds,” Techstory website, https://techstory.in/nydig-and-wells-fargo-partner-to-launch-bitcoin-funds/, accessed December 2021.
¹⁸ JPMorgan teams with Singapore's DBS and Temasek to form a blockchain payment platform, Business Insider, April 2021 JPMorgan teams with Singapore's DBS and Temasek to form a blockchain payment platform | Currency News | Financial and Business News | Markets Insider (businessinsider.com)
¹⁹ “Gemini partners with Mastercard to launch new crypto rewards credit card this summer,” Mastercard website, https://www.mastercard.com/news/press/2021/april/gemini-partners-with-mastercard-to-launch-new-crypto-rewards-credit-card-this-summer/, accessed December 2021.
²⁰ “Commerzbank and partners execute live transactions on the Marco Polo trade finance network,” Marco Polo Network website, https://www.marcopolonetwork.com/news/commerzbank-and-partners-execute-live-transactions-on-the-marco-polo-trade-finance-network/, accessed December 2021.
As digital assets continue to gain momentum, financial institutions that can overcome outdated beliefs and leverage future-back approaches to prioritize digital asset strategies will be positioned for growth.