If payments were a neighborhood, cryptocurrency would be tagged as the new kid on the block. The concept of digital currency was first developed in the early 1980s, but the term cryptocurrency wasn't coined until a full decade later. Fast forward thirty years and this player in payments is gaining traction among both consumers and businesses as the digitization train picks up its already hurried pace.
As a community bank or credit union, you may be wondering whether cryptocurrency is really going to stick. Based on the headlines and stances of household name financial institutions, cryptocurrency may indeed be the wave of the future.
J.P. Morgan wades further into cryptocurrency waters
Investment banks Goldman Sachs and JP Morgan are among the latest FIs that are banking on cryptocurrency taking hold, according to CNBC. In 2019, J.P. Morgan unveiled JPM Coin, becoming the first bank to create its own cryptocurrency. And in an interview with the cable news outlet, JP Morgan Co-President Daniel Pinto said that while cryptocurrency may be in its infancy relative to other forms of exchange, the degree to which it backs the asset class will largely be fueled by demand.
"If over time an asset class develops that is going to be used by different asset managers and investors, we will have to be involved," Pinto explained. "The demand isn't there yet, but I'm sure it will be at some point."
"300 Bitcoin-enabled coinstar kiosks are poised for installation in Florida."
That point may have already arrived. According to a press release obtained by ATM Marketplace, at least 300 Bitcoin-enabled Coinstar kiosks are poised for installation in Florida over the coming months. The company, Coinme, a cryptocurrency-to-cash exchange provider, operates close to 6,000 physical locations in the U.S. alone and nearly 20,000 worldwide.
Neil Bergquist, who co-founded Coinme and serves as its CEO, noted in the press release that he's excited to be adding Florida to the growing number of states in which it operates, now totaling 45.
"Through our partnership, we're able to continue to expand into new areas to meet the ever-growing demand of accessible avenues to purchasing digital currencies," Bergquist said.
Americans slowly becoming more engaged
In terms of interest level among everyday Americans, cryptocurrency has been a slow burn. In a 2018 Gallup poll, just 2% of adults questioned said they owned Bitcoin. More than a quarter of these same participants said they were at least fascinated by it, but didn't anticipate buying in the short term.
In a more recent Gallup survey, 3% of respondents said they had investments in cryptocurrency or other similar assets, only slightly behind real estate (5%).
More FIs follow
As a result, Regional FIs are also beginning to blaze a cryptocurrency trail. This includes New York-based Signature Bank, which in 2018, debuted Signet. The digital platform allows clients to convert cash into digital currency through the utilization of blockchain technology.
As Signature Bank Chairman Scott Shay noted in the press release at the time, the proprietary platform allows commercial clients to make real-time payments in no time, all at no cost in terms of transaction fees.
Financial institutions worldwide are making similar investments. This includes Japan, as Mizuho Bank — one of the nation's largest — launched the digital currency mobile payments platform J-Coin Pay. Five dozen other regional domestic banks were involved in the rollout, as Quartz reported in February 2019. Although the founders say J-Coin is not a cryptocurrency per se, the manner in which users interact with it is similar to Bitcoin.
More than 20% of transactions in Japan are digital, according to Quartz.
Will even more banks become 'crypto-curious'?
Are additional banks bound to jump aboard the cryptocurrency bandwagon? For years, industry experts have urged caution, largely because it is unregulated by the FDIC. But with more highly respected institutions now entering the game, insiders suspect it's only a matter of time before other banks follow suit with their own offerings.
"[Crypto] is still in a very early stage," said Adena Friedman, CEO of Nasdaq, as reported by The Wall Street Journal. "And that's great because I think we've seen this really elegant construct come into the ecosystem in terms of the blockchain and what you can do with it."
She went on to say that cryptocurrency may soon become mainstream, as more institutional players get involved.
Other banks that are already in some way involved in crypto include La Jolla, California's Silvergate Bank. And this past April, the Office of the Comptroller of the Currency granted conditional approval to New York-based Paxos National Trust to establish a national trust bank charter, ABA Journal reported.
Bottom line: Cryptocurrency is almost assuredly here to stay, and it may be an asset worth pursuing. While we don't presently provide cryptocurrency services specifically, BranchServ Convergint's mission is helping banks like yours adjust and succeed as the industry becomes increasingly digitized. Contact us today to learn more.