Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
In the wake of crypto exchanges encroaching into banking territory, smaller banks seek to enroll in NYDIG’s crypto custody program. FIS, the global leader in payments integration will make it a reality. In turn, Bitcoin hodlers are in for exciting times.
NYDIG Reveals Crypto Adoption Among Smaller US Banks
The pressure wave from this year’s institutional adoption of Bitcoin is slowly spreading into the banking sector. Although Bitcoin was originally envisioned as a P2P payment system that would replace banks, it transformed into a holding asset instead, dubbed as digital gold. In other words, its deflationary nature has become more important than its transaction times and fees suitable for a frictionless payment system.
As such, Bitcoin is headed to a number of banks, according to New-York-based crypto custody company NYDIG. In cooperation with Fidelity National Information Services (FIS), NYDIG – a subsidiary of Stone Ridge asset manager – will implement Bitcoin custody services in hundreds of US banks. If FIS rings a bell, that’s because it already partnered with Quontic Bank to create a Bitcoin Rewards Checking account.
As a banking vendor, Florida-based FIS is an established purveyor of payments technology. If you are using Apple Pay, you can thank FIS for implementing it. Two years ago, FIS bought the UK-based WorldPay, which surpasses even PayPal in transaction volume at $1.7 trillion annually.
Just recently, the Tokenist noted that the client pool of those who would prefer crypto offering from their banks is the size of Canada. However, it seems that only smaller financial institutions have enrolled into the Bitcoin custody program. California-based Suncrest Bank is one of them, with a market cap of $165.7 million. Such banks are not too big to fail like JP Morgan or Goldman Sachs, so they have to rely on a lean business model and cater to customers more.
Payment Processing Intermediaries Will Not Be Pleased
It is fair to say that people like to have their services in one place as much as possible. In finance, this evolved into having apps to conduct your transactions. With banks offering crypto trades just as you are now able to do on Square’s CashApp or PayPal, this severely undercuts their business model.
If we just take Jack Dorsey’s Square as an example, it generated $4.57 billion from Bitcoin revenue last year, which represents about half of its total consolidated revenue for 2020. Local banks that are flexible enough to integrate cryptos will now offer a consolidated financial experience – credit/debit cards, lending, borrowing, ATMs, and crypto trades. In hindsight, it was inevitable they would meet such demand given the fact that millennials constitute the largest demographic while also fully embracing Bitcoin.
Moreover, following the listing of Coinbase on Nasdaq, banks see the crypto writing on the wall. If Coinbase can already supplant a banking service by offering a loan of up to $100k with BTC as a collateral, missing out is not something the smaller banks can afford. In the meantime, larger banks – Morgan Stanley, JP Morgan, and Goldman Sachs – are starting to offer Bitcoin funds, but only for their top clients.
Another Psychological Barrier Leveled
According to the Institute for Local Self-Reliance, smaller financial institutions constituted about 16% of deposited assets market share in 2018.
While this percentage may represent just a couple of big banks, it is still significant enough to spur a renewed crypto adoption. This holds true now more than ever as Janet Yellen worries about the economy overheating amid soaring prices of food, lumber, fuel…It’s almost as if Michael Burry’s runaway inflation prediction is coming into fruition.
In such an environment, it would be wise to hold assets detached from the central monetary system. This time around, deflationary Bitcoin assumes the traditional role of silver/gold as a hedge against inflation. By the same token, millions of clients across hundreds of banks will be a few taps away from getting Bitcoin by the end of the year.
This would break down the last psychological barrier, if there is any left at this point. When we start to see a crypto asset in a familiar bank, right alongside all other regular transactions, it is difficult to imagine not seeing a reinvigorated Bitcoin bulllrun in the near future.
What is your experience with smaller banks? Do they offer better services and rates than the banking giants? Let us know in the comments below.