The five largest U.S. banks’ views on cryptocurrencies: issuance, investment, and trading

On July 16, 2021, Bank of America, the second largest bank in the United States, approved trading Bitcoin futures for some customers. Bank of America has always been conservative in the crypto industry, and this futures trading service is now only open to some customers because it requires a large amount of margin.

So far, the top five banks in the United States (JPMorgan Chase, Bank of America, Citibank, Wells Fargo, and Goldman Sachs) have all entered the crypto asset market:

In March 2021, JPMorgan Chase applied to the SEC (U.S. Securities and Exchange Commission) to launch a crypto digital fund to diversify its clients’ asset portfolios;

On July 2, 2021, Citi established a crypto asset department, which will focus on cryptocurrency and blockchain business;

On May 20, 2021, Wells Fargo announced that it would provide cryptocurrency investment strategies to its customers;

In May 2021, Goldman Sachs relaunched its cryptocurrency trading desk after a three-year hiatus.

The top five banks in the U.S. and their assets

Although the five largest banks in the United States have provided cryptocurrency trading services to their customers, the attitude of traditional American banks towards crypto assets has been conservative and even critical. As the demand for cryptocurrency continues to grow, the voices of traditional banks criticizing cryptocurrency have gradually weakened: some banks have maintained a neutral opinion, while Goldman Sachs and others have changed their views and are optimistic about the long-term development of cryptocurrency.

JPMorgan Chase: Issue Morgan Coin, but not optimistic about Bitcoin

JPMorgan Chase CEO Jamie Dimon has criticized and pessimistic about the development of Bitcoin on many occasions in public. On September 13, 2017, Dimon criticized Bitcoin at an event held by Barclays Bank, claiming that it was a "fraud" activity and said that he would fire traders who were found to be trading cryptocurrencies. At a hearing of the U.S. Congressional Financial Services Committee held on May 27, 2021, he still advised people to avoid and stay away from Bitcoin and cryptocurrencies in general.

Despite this, JPMorgan Chase is still actively developing blockchain and cryptocurrency. In February 2019, JPMorgan Chase announced that it would become the first large US bank to independently develop cryptocurrency and issue JPM Coin (a stablecoin pegged one-to-one with the US dollar). This cryptocurrency can instantly complete payment settlements between JPMorgan Chase customers. JPM Coin can only be exchanged within JPMorgan Chase Bank and cannot be traded on the market.

Morgan Bank officially launched the JPM Coin in October 2020. However, the news has since been overshadowed by the cryptocurrency bull market, and there has been little news coverage of the JPM Coin. The JPM Coin is now mainly used to provide securities settlement services to JPMorgan Chase's client base.

Starting in April 2021, JPMorgan Chase began to provide Bitcoin actively managed fund services to wealthy clients, and NYDIG will serve as the custodian service provider for this fund.

Although JPMorgan Chase offered Bitcoin trading to wealthy clients in April, it still has reservations about cryptocurrencies. On June 24, 2021, JPMorgan Chase released a research report showing that 80% of institutional investors have no intention to allocate to Bitcoin. JPMorgan Chase believes that since the volatility of Bitcoin is not linked to that of gold, the price of Bitcoin should be between $23,000 and $35,000. JPMorgan Chase also pointed out: "In the foreseeable future, the volatility between gold and Bitcoin is unlikely to fully converge or reach equilibrium."

JPMorgan Chase also released an investor survey questionnaire, with samples from about 3,000 American investors from more than 1,500 institutions. 90% of the investors said that their institutions and companies do not invest in crypto assets, and 80% of the respondents said they would never enter the cryptocurrency market. Nearly 30% of the respondents agreed with the view of "stock god" Warren Buffett that Bitcoin is a toxic "rat poison." 80% of the investors interviewed said they hope to impose stricter regulatory restrictions on cryptocurrencies. Almost every investor interviewed believes that fraud in this field is "somewhat common."

Bank of America: Keep a “distance” from Bitcoin and other cryptocurrencies

On February 3, 2018, JPMorgan Chase, Bank of America, and Citibank successively cut off the channels for customers to purchase cryptocurrencies with their credit cards. At that time, they generally believed that the market was very immature and volatile. Bank of America issued a statement at the time: Bank of America's customers can freely purchase Bitcoin and other cryptocurrencies, but not through Bank of America's platform. Even though Bank of America had applied for and obtained nearly 43 blockchain patents at that time.

Bank of America launched Bitcoin derivatives on its trading platform on July 17, 2021, allowing customers to trade. Bloomberg reported that Bank of America established a research group dedicated to cryptocurrencies and related technologies as early as 2019 to study cryptocurrencies.

At the same time, Bank of America has been committed to blockchain research for many years and has continued to develop related technologies and apply for patents. According to International Strategies, Bank of America has applied for a total of 60 blockchain patents as of July 2020, leading other institutions in the industry.

Despite actively researching blockchain technology, Bank of America's attitude towards cryptocurrencies has not changed. In March 2021, Bank of America said there was "no reason to support Bitcoin," believing that it was too speculative. In addition, Bank of America believes that in addition to price fluctuations, Bitcoin's impact on the ecosystem is also extremely harmful. Bank of America pointed out that the verification of Bitcoin transactions generates about 60 tons of carbon dioxide emissions, equivalent to the emissions of the entire Greece. Every $1 billion in Bitcoin inflow will bring carbon dioxide emissions equivalent to 1.2 million vehicles. If the price rises to $1 million, Bitcoin may surpass Japan and occupy the position of "the world's fifth largest carbon emitter."

On April 9, 2021, Bank of America, Citigroup, and Wells Fargo attended a hearing of the U.S. Senate Banking Committee and shared their opinions on cryptocurrencies at the meeting.

Bank of America CEO Brian Moynihan said that the bank will continue to "evaluate cryptocurrency-related products and services, risks and customer needs" and that the bank remains at a distance from Bitcoin and other cryptocurrencies.

He stressed that "we haven't found a large-scale blockchain use case yet." Bank of America said: Currently, we do not lend against cryptocurrencies, nor do we provide banking services to companies whose primary business is in cryptocurrencies or that simplify cryptocurrency trading and investing.

Citibank: Always be "cautious" about cryptocurrencies

Citibank is a traditional bank that is relatively neutral towards cryptocurrencies. On July 8, 2015, it was reported that it was developing its own Citicoin, but the project was aborted in 2019. When major banks criticized cryptocurrencies, Citibank rarely made comments criticizing cryptocurrencies. In the past, Citibank only banned its customers from purchasing cryptocurrencies through its credit cards.

On May 7, 2021, it was reported that Citibank was considering offering cryptocurrency-related services to its clients in response to growing demand, especially from asset management companies and hedge funds. Itay Tuchman, Citibank's global head of foreign exchange, told the Financial Times that the investment bank is already exploring the possibility of offering cryptocurrency services to its clients, but will not rush to launch services that would worry regulators.

“We shouldn’t do anything that’s unsafe and unhealthy,” he said. “When we are confident that we can build products that are beneficial to customers and that regulators can support, we will enter (the cryptocurrency market).”

Citibank expressed its cautious attitude towards cryptocurrencies at a hearing on April 9, 2021. Jane Fraser, CEO of Citibank, said that Citibank has taken a "cautious approach" to cryptocurrencies as the bank "understands changes in the crypto asset space and the use of distributed ledger technology, customer needs and interests, regulatory developments and technological advances."

He also noted: “Before we get involved in cryptocurrencies, we believe it is our responsibility to ensure we have clear governance and controls in place.

Wells Fargo: Cryptocurrency is an “investable asset”

On January 17, 2018, Wells Fargo Chairman and CEO Dick Kovacevich said in an interview with Squawk on the Street that he believed Bitcoin was a pyramid scheme and meaningless, and that the price of Bitcoin should be lower. According to Coindesk data, the price of Bitcoin ranged from 4,000 to 8,000 from October 2017 to March 2018. Among them, the highest price of one coin could reach 18,000 US dollars.

Bitcoin price trend from October 2017 to March 2018, source: Coindesk

In June 2021, Wells Fargo began offering cryptocurrency financial products to wealthy customers as the company recognized cryptocurrency as a "viable investable asset." Wells Fargo believes that cryptocurrency is an evolving asset that can be considered an alternative investment. It is different from traditional stock and commodity markets and may provide attractive hedging opportunities.

In February 2020, Wells Fargo invested $5 million in Elliptic, a British startup that helps banks manage risks related to cryptocurrencies. The company is known for its analytical tools, which it sells to some of the world's largest cryptocurrency platforms, including Binance and Circle, to help them detect and block illegal cryptocurrency transactions.

At a hearing on April 9, 2021, Wells Fargo said it would pay close attention to the crypto market. Charles Scharf, CEO of Wells Fargo, said the company is about to announce a pilot project to use blockchain technology to "complete internal book transfers for cross-border payments within our global branch network." But for cryptocurrencies, he said: We will continue to actively pay attention to the development of cryptocurrencies and see them as possible investment products in the future.

Goldman Sachs: Cryptocurrency has become a new asset class and will continue to exist

On January 23, 2018, Goldman Sachs issued a warning that cryptocurrency is the biggest bubble in history, and the bubble of Ethereum is bigger than that of Bitcoin. Goldman Sachs believes that cryptocurrency has not only exceeded the bubble level of the financial market, but also exceeded the level of the "Tulip Mania" that occurred between 1634 and early 1637.

Comparison chart of Bitcoin and tulip mania, source: Bloomberg

Goldman Sachs also said in a warning to clients: "Although we do not know whether the price of Bitcoin or other cryptocurrencies will double or triple in the future, we do not believe that these cryptocurrencies can maintain their value in the long term."

However, in March 2021, Goldman Sachs restarted its cryptocurrency trading platform, mainly for high-net-worth clients. Goldman Sachs originally planned to launch the trading platform in 2017, but due to the market crash, the plan was shelved in 2018. Goldman Sachs revealed that institutions are increasingly interested in Bitcoin, so it decided to restart Bitcoin trading services.

In May 2021, Goldman Sachs released a report titled "Cryptocurrency: A New Asset Class?", reversing its previous pessimism about cryptocurrencies as a potential institutional asset class. The financial giant believes that Ethereum could become the dominant blockchain-based encryption technology in the future and have a huge impact on the data economy.

Goldman Sachs explored the development of cryptocurrencies through analysis and interviews with multiple experts. In the report, Goldman Sachs emphasized the benefits of blockchain technology and paid special attention to Ethereum-based cryptocurrencies. The report stated that Ethereum "currently appears to be the cryptocurrency with the highest potential for actual use, as Ethereum is the platform for native cryptocurrencies and the most popular platform for smart contract application development."

However, Goldman Sachs said in the report that even though Goldman Sachs believes that Ethereum may eventually surpass Bitcoin, neither cryptocurrency will soon replace gold as the most common means of storing value due to volatility. Goldman Sachs further explained that some commodities such as gold can hedge against bad inflation, while the bank's cryptocurrency is more of an "inflation risk hedge." The bank said that this hedge comes with risks.

Goldman Sachs cautiously but optimistically asserts that while crypto has its fair share of concerns, ultimately, it will become a viable asset class that is here to stay.

Shortly after the report was released, Goldman Sachs invested 54 billion won (about 310 million yuan) in South Korea's KCOIN in June 2021. KCOIN is a cryptocurrency that can be used like cash, and can be used to pay for online shopping malls and offline franchise stores, the three major domestic news agencies, gas fees, national pensions, and health insurance premiums. As long as you log in to the mobile chat app called KTALK, users can accept or give KCOIN to each other, and can pay for electronic vouchers.

In the same month that it invested in KCOIN, Goldman Sachs also partnered with crypto investment giant Galaxy Digital to launch a Bitcoin futures trading product for its clients. Galaxy Digital positioned the company as a bridge between traditional financial companies and cryptocurrency trading companies, mainly helping Goldman Sachs clients such as large hedge funds and institutions invest in Bitcoin.

In addition, Goldman Sachs also revealed that it will provide options and futures trading for Ethereum in the future.

Five major U.S. banks launch services and investments in cryptocurrency

Market demand for crypto assets is rising sharply

JPMorgan Chase is an opponent of Bitcoin, especially its CEO Dimon. After JPMorgan Chase applied for a cryptocurrency fund, Dimon issued a statement saying: "I really don't care about Bitcoin. I'm not interested in Bitcoin. But customers are interested, and I can't tell customers what to do."

Goldman Sachs restarted its cryptocurrency trading platform after a lapse of 3 years. Matt McDermott, head of its cryptocurrency department, said in an interview that institutions have huge demand for crypto assets, which led to Goldman Sachs restarting its cryptocurrency trading platform.

Cryptocurrency has recently experienced an explosive growth. Tesla, Square, Microstrategy and other companies have invested in cryptocurrencies. This has also led many commercial investment institutions to focus on cryptocurrencies. Grayscale is a global cryptocurrency asset management company, and its funds received investment from many institutions in the fourth quarter of 2020. These all reflect that corporate institutions have begun to invest in cryptocurrencies and expand demand, and traditional banks naturally want to get a piece of the pie.