How US Financial Giants Join the Crypto Market
The crypto market, boasting over $1.2 trillion in capitalization and hundreds of millions of users, is steadily drawing the attention of top-tier banking, financial, and investment entities. Yet, due to licensing hurdles, their entry remains somewhat barred. But as the old saying goes, where there’s a will, there’s a way…
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It's no secret that US institutional investors are chomping at the bit to dabble in ETF operations (asset index exchange trading) as well as the trading of tokenized assets and maneuvering through the cryptocurrency OTC market.
The straightforward route to such could involve aligning with companies that already have the needed licenses, permissions, and trading platforms at their disposal. Another way is to create a similar company from scratch.
Let's delve into the approaches taken by eight of the finance behemoths, collectively overseeing more than $27 trillion in assets.
Pathways to the digital asset market from the vantage point of America's financial powerhouses. Source: Twitter (@CryptoKingKeyur)
BlackRock
In 2022, BlackRock, one of the world's leading investment companies, managing a staggering $9 trillion, started its hunt for a partner with a robust presence in the crypto world. Their search ended with one of America's largest crypto exchanges – Coinbase. Thanks to this alliance, over 13,000 institutional BlackRock clients could invest in digital assets using the Aladdin trading platform, courtesy of its integration with Coinbase Prime. Currently, we're all on tenterhooks awaiting the SEC's verdict on BlackRock's application for a Bitcoin spot ETF.
Fidelity Investments
Back in 2019, this renowned investment firm spawned a subsidiary named Fidelity Digital Asset Services LLC, and a year later, it unveiled a European office in London. The European offspring secured the green light to transact in cryptocurrencies from the UK regulator (FCA). By the end of 2022, it was resolved to extend services not just to institutional, but also to individual investors. This led to the launch of Fidelity Crypto, a service allowing anyone willing to undergo the KYC procedure to trade in the digital assets with utmost liquidity.
Homepage of the Fidelity Digital Assets website. Source: fidelitydigitalassets.com
JPMorgan Chase & Co.
At the end of 2020, the management of JPMorgan Chase & Co., the largest US bank in terms of assets, decided to establish its own blockchain platform, Onyx. With this platform, it's possible to conduct transactions involving tokenized bonds, as well as make cross-border transfers using tokenized assets, such as USD and EUR stablecoins. These assets were consolidated under the JPM Coin brand. JPMorgan seeks to create competition for the interbank fiat payment system SWIFT and for crypto transfers in XRP and XLM.
Morgan Stanley
In 2021, another major US banking conglomerate, Morgan Stanley, decided to offer investment opportunities in digital assets exclusively to its most affluent clients. The bank partnered with several funds, two of which belong to Galaxy Digital, and one is a joint venture of asset management company FS Investments and cryptocurrency investment company NYDIG.
Goldman Sachs
In collaboration with Galaxy Digital, Goldman Sachs, one of the largest investment banks in the world, offered its clients the ability to trade cryptocurrency derivatives—futures and options paired with BTC and ETH—in 2021. The bank also enabled its clients to enter into forward contracts paired with BTC and settled in fiat, thereby providing them with access to the cryptocurrency OTC market.
BNY Mellon
In June 2022, BNY Mellon, the oldest bank in America, conducted a survey among its clients and found that 91% of them were interested in investing in digital assets. In response to this interest, the Digital Asset Custody platform was launched in October 2022. Fireblocks, a cryptocurrency custodian, was a partner in its creation. Thanks to this partnership, the bank's clients can buy, store, and transfer Bitcoin and Ether. BNY Mellon plans to connect as many funds as possible to the platform and expand the list of digital assets. Moreover, BNY Mellon also collaborates with the analytical cryptocurrency company, Chainalysis.
Crypto companies partnering with BNY Mellon. Source: bnymellon.com
Invesco
An investment company managing nearly $1.5 trillion in assets, has been interested in digital assets since 2021. In the European market, it launched an analogue of a spot Bitcoin ETF, the Invesco Physical Bitcoin ETP (BTIC), in partnership with CoinShares. This exchange-traded product was listed on the German stock market, Deutsche Börse Xetra. However, things did not go as smoothly in the American market. Invesco's application for a spot Bitcoin ETF in partnership with Galaxy Digital was rejected.
Bank of America
The American financial conglomerate, Bank of America, decided to follow suit with Goldman Sachs and in 2021 offered its wealthiest clientele access to Bitcoin futures trading via the trading platform of the Chicago Mercantile Exchange (CME). Bank of America also sees potential in the trading of tokenized precious metals, particularly gold, although it has not yet finalized a platform or partner.
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