American Bankers Association suggests partnership with crypto firms 

  • A fresh 20-page report by America Bankers Association (ABA) suggests banks should partner with crypto firms.
  • The report pointed out that gamification, environmental concerns, and Decentralized Finance (DeFi) could pose a serious problem.

The American Bank Association (ABA) has issued a fresh 20-page report suggesting banks partner with crypto firms in response to the growing clients’ demand and the huge profitability in the industry. The report provides a comprehensive overview of crypto assets which maps its activities with bank products and services. By crypto assets, the report singles out stablecoins, cryptocurrencies, Central Bank Digital Currency (CBDC), and Non-Fungible Tokens (NFTs). 

The report lists some of the most demanded crypto use cases including as a store of value, custody or wallet provider services, interest-bearing accounts, lending, payments, broker-dealer, exchange trading, insurance, network security, and asset management. 

The growing demand for these services can provide profits to banks through service fees. 

80 percent of Bitcoin holders ready to move their assets to banks

According to the report, banks are looking forward to providing their clients access to crypto. A survey conducted by NYDIG, an institutional crypto trading and custodial firm, disclosed that 80 percent of Bitcoin holders are ready to move their assets to banks. This is one of the key reasons for the consideration of offering clients access to crypto products. Banks are encouraged to consider partnerships with blockchain-powered firms for faster, efficient, and cheaper cross-border transactions. They are also encouraged to offer banking services to crypto companies via services such as digital identity, reporting, KYC/AML, and banking.

With the increasing profitability of the crypto industry, banks have found it more lucrative to take crypto companies on as partners and their customers as clients while crypto companies need banks to provide access to the payments system to onboard and offload fiat deposits.

Crypto regulations and challenges

The report further provides a comprehensive overview of the regulatory framework surrounding the operations of crypto services. The offering or sale of crypto is regulated by the SEC if it is classified as a security by state or federal law. In terms of money transactions, the report explains how FinCEN requires Money Services Business (MSB) registration as well as the requirement for Money Transmitter License (MTL). For tax reporting, the report mentioned that the IRS classifies crypto as a property. 

However, the uncertain regulatory treatment of many crypto assets and the novelty of the business models can often create unclear or disparate requirements that may leave significant gaps in regulation and oversight.

Despite the suggestions for banks to partner with crypto firms, the report pointed out that gamification, environmental concerns, and Decentralized Finance (DeFi) could pose a serious problem. It explains that crypto could be targeted by regulators, especially the unregulated spot market based on critical scrutiny of no-fee, online retail brokerages. Also, the focus of the financial system to address the challenges of climate change could hinder their penetration into the crypto market as assets that use Proof-of-Work consume a lot of energy.

 

About Author

John's a cryptocurrency and blockchain writer and researcher with years of experience. He has a lot of interest in emerging startups, tokens, and the invisible forces of demand and supply. He holds a Bachelor's degree in Geography and Economics. My Email: (kojokumijohn@gmail.com)

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