Most large banks are investing in crypto and blockchain companies.
According to industry observers Blockdata, 55 of the top 100 banks (valued by assets under management) have invested in crypto or blockchain companies, either directly or through subsidiaries.
This is despite the ongoing controversy over cryptocurrencies – the rollercoaster valuations of tokens such as Bitcoin, which mitigates against their use as money, international clampdowns on mining (notably in BTC epicentre China) and their growing use in money laundering and financial crime.
The ability of high-profile investors such as Tesla and SpaceX supremo Elon Musk to use social platforms to influence crypto markets is also a concern for regulators.
In total, 67 crypto and blockchain companies have benefited from leading banks’ financial support. Analysts believe this is because banks can’t afford not to jump on the bandwagon, both financially and strategically – especially when valuations are on an upwards trajectory.
Blockdata estimates that the total market capitalisation of the blockchain sector alone is more than $1.5 trillion.
By far the most active investor in crypto and blockchain is Barclays, with 19 invested companies, followed by Citigroup (9), Goldman Sachs (8), J.P. Morgan Chase (7) and BNP Paribas (6).
Meanwhile, investors active in the biggest funding rounds to date are Standard Chartered ($380 million over six rounds), BNY Mellon ($320.69 million from five rounds), Citigroup ($279.49 million from nine rounds), UBS Group ($266.2 million in five rounds) and BNP Paribas ($236.05 million from nine rounds).
According to Blockdata, crypto custody – where an institution manages client funds for a fee – is a dominant theme for traditional banks’ investment portfolios. Nearly one-quarter (23 percent) of the top 100 banks are either building custodian solutions themselves or investing in companies that provide them.
As an example of the attraction of crypto players to the banking sector, Coinbase was recently valued more highly than Goldman Sachs, yet has just four percent of the number of employees.
Founded in 2012, Coinbase has revenues of $1.4 billion, was valued at $85 billion on its Nasdaq debut, and has less than 1,250 employees worldwide.
Total investments in the company to date stand at over $547 million, with a market capitalisation that is 100 times higher: $54.5 billion, at the time of writing.
According to the FT, Coinbase’s Q2 2021 revenues rose more than 1,000 percent year on year. Naming both Tesla and SpaceX as customers it has expressed its intention to be the “Amazon of assets”, and recently offered customers the ability to use platforms such as Apple Pay and Google Pay.
By contrast, rival Binance.com has faced intense regulatory scrutiny, investigations of money laundering, and recently lost its US CEO, Brian Brooks – former Comptroller of the Currency in the Trump administration – who resigned over the company’s strategic direction.
As previously reported on Transform Finance, many central banks are actively investigating the potential of launching central bank digital currencies (CBDCs) – stablecoin equivalents of currencies such as the US dollar, the euro, and the pound – in response to the digital/crypto revolution.