How Banks Are Adapting to Cryptocurrency

Today, there are more than 580 million crypto users across the world. Cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and countless others are causing a digital transformation in global commerce. In fact, many banks, credit unions, and financial institutions are beginning to take notice and evolve. 

JP Morgan was one of the first legacy banks to embrace crypto, releasing its own stablecoin in 2019. Other financial institutions, like Bank of America and Ally Bank, have begun allowing their customers to interact with crypto businesses. 

If you’re contemplating integrating crypto services into your bank’s business model, this guide will explore the benefits financial institutions can gain from the cryptocurrency industry.

Understanding Cryptocurrency and Its Functionality

Cryptocurrency, a digital currency stored on a blockchain network, is secured by cryptography, making it immune to counterfeiting or double-spending. 

Its decentralized nature offers a unique advantage over traditional currencies, as cryptocurrency isn’t susceptible to inflation or regulatory oversight. One significant benefit of cryptocurrency is that it can facilitate cross-border payments without exchange rates, fees, or long transfer times, unlike fiat currency. 

The most popular cryptocurrency in the world is Bitcoin, with a 51.65% market capitalization rate. Ethereum, Tether (USDT), and Binance coin (BNB) are other popular cryptocurrencies and stablecoins available on the market. 

The fundamental basis for cryptocurrency is simple. Cryptocurrency exchanges happen on a peer-to-peer basis. Transfers can be anonymous and don’t require any bank approval. Cryptocurrencies don’t have any intrinsic value set by a government and are simply worth what people are willing to pay on the market. 

Because of their decentralized nature, cryptocurrencies are naturally volatile. This means that prices can rapidly fluctuate throughout the day. 

This is the natural consequence of a decentralized form of currency. Since cryptocurrencies aren’t owned, or centralized, their values can change at a moment’s notice. 

On the other hand, centralized currency like the US Dollar can be regulated to reduce market volatility. 

As a newer digital currency, crypto has yet to catch up to the allure of traditional investments, such as stocks and bonds. 

Positive Impacts of Cryptocurrency on Banks

Cryptocurrency isn’t just a popular investment vehicle for traders. It’s also a viable income stream for banks and other financial institutions. Here are some of the advantages the crypto ecosystem can bring to banks.

New Sources of Revenue

Banks can increase their revenue by offering a wide range of crypto services, such as:

  • Trading: Banks can allow their customers to buy, sell, and trade cryptocurrencies on their platforms, profiting from trading and transaction fees. Goldman Sachs recently became the first major bank to operate a crypto trading desk to capitialize on the popularity of the crypto market. 
  • Custody: A bank could also let customers store purchased cryptocurrencies using an in-house wallet, which also enables income from transaction fees. This is exactly what Deutsche Bank is doing in allowing institutional clients to hold their crypto assets
  • Tokenization: Banks can create a tokenization platform for both experienced and new investors to digitize real-world assets (RWAs). For example, Goldman Sachs has already unveiled GS DAP, their native blockchain-based tokenization platform. 


Cryptocurrency is a versatile investment vehicle offering several revenue opportunities for the banking industry to take advantage of. 

Improve Existing Products

Cryptocurrencies can also enhance traditional services, such as savings accounts and remittances. 

Remittances, payments made to people in other countries, provide a major source of income for many banks. These cross-border payments require processing through several intermediaries, resulting in high fees. Banks can leverage crypto to avoid these fees, giving customers an easy and affordable way to send money.

Banks can also provide crypto savings accounts to their customers. These accounts typically earn interest between 7% and 10%, which is much higher than the average 0.46% interest on traditional savings accounts. 

Bigger Market Share

Financial institutions looking to broaden their customer base could benefit immensely from introducing cryptocurrency into their service offerings. The crypto community is full of tech-savvy individuals, often Millennials and Gen Z. 

Delivering crypto services could attract these customers and increase your organization’s market share on a local and international level. Additionally, cryptocurrency is becoming widely popular among unbanked and underbanked populations. 

Buying cryptocurrency is often easier than setting up a bank account—all you need is a crypto wallet and identification for verification purposes. So if your bank caters to international audiences, offering crypto services could give unbanked people unparalleled financial freedom. 

Enhanced Security

Financial institutions spend billions developing robust security technology and protocols to protect themselves and their customers. But crypto is inherently secure and can help shield banks from fraudulent activities.

The foundation of any cryptocurrency is blockchain. Blockchain is an immutable, public ledger that records all transactions. This record can’t be tampered with, and outside forces do not manage it. 

In addition, blockchain in banking is highly encrypted to prevent money manipulation, fraud, and money laundering schemes. Banks that embrace cryptocurrency can rest easy knowing they won’t be compromised by fraud or cyber-attacks. 

Quicker Transactions

Fiat currency has to be converted into another currency during an international bank transfer, and the full process can take 1-5 business days. 

On the other hand, crypto transactions can take anywhere from 30 minutes to two hours to complete. This is because cryptocurrencies are completely decentralized and don’t have exchange rates. A single BTC in one country is worth the same in another country. 

So cryptocurrency transactions are almost always faster than traditional transactions because they don’t rely on intermediaries during payment processing. This is ideal for people who want to send cross-border payments with ease. 

Challenges of Crypto Adoption for Banks

Cryptocurrency may be increasingly popular worldwide, but this digital currency still has notable flaws. Here are some of the challenges banks must overcome to incorporate crypto into their services.

Decentralized Nature

Cryptocurrency was designed to be the antithesis of traditional banking. Due to its decentralized nature, crypto isn’t governed by any single authority. This could present a problem for banks that want to introduce crypto offerings into their centralized financial systems

Particularly, banks could have difficulty achieving a reasonable level of control and regulation over popular cryptocurrencies like Bitcoin and Ethereum. Nonetheless, cryptocurrencies are completely decentralized, meaning that banks will have to accept their limited control over these currencies. 

Market Volatility

Cryptocurrencies are new to the financial market, so they are prone to market volatility, which can cause rapid price changes. 

Since crypto doesn’t have intrinsic value, factors like investor sentiment, government regulation, and news outlets regularly affect its market. Volatility in the crypto market can negatively impact supply, demand, and liquidity, which isn’t ideal for investors and financial institutions

Nonetheless, financial institutions can provide tokenized trading options in more secure commodities like RWAs. 

Concerns Over AML/KYC

In many countries, cryptocurrencies have come under tight scrutiny and legislation. For example, Anti-Money Laundering (AML) and Know Your Customer (KYC) are security protocols designed to keep crypto businesses and financial institutions from participating in illegal criminal activities. 

However, enforcing AML and KYC can be difficult, as crypto users can hide under a cloak of anonymity. This can make it challenging for organizations to trace transactions and determine if suspicious users are involved in illegal activities. If fraudulent activity does occur, that bank could be held liable and face reputational risk. 

Still, plenty of countries are requiring crypto exchanges and financial institutions to abide by regulations that keep customers and their funds secure. 

Role of Smart Contracts

Smart contracts are autonomous programs that automatically execute upon a specific condition. For example, a manufacturer that needs raw materials could set up a smart contract with a supplier for automatic payments and delivery. Once the supplier receives a payment, they can automatically schedule a shipment. 

Smart contracts are created using blockchain technology and require specialized knowledge to master. However, if a bank is committed to employing its own cryptocurrency, mastering the Solidity programming language and the Ethereum environment will be a worthwhile investment. 

Regulation Changes

Crypto regulations are constantly changing to reflect new financial technology (Fintech) innovations, such as smart contracts and blockchain networks. But these regulations can vary significantly by country. This can be a challenge for banks that want to embrace crypto. 

For example, an international bank must understand the crypto regulations in each jurisdiction it services to stay compliant. 

However, increased regulations can be positive. Many governments are crypto-friendly and support regulations that increase buyer confidence in the crypto market

Generally speaking, some regulations could ease the fears of new investors and lead them to financial institutions that support crypto. Thus, crypto regulations may end up benefitting crypto exchanges and generate investor confidence into the market. 

Top Future Trends of Crypto in the Banking Sector

The state of cryptocurrency is constantly evolving. Here are the following future crypto trends you can expect to see happen in the banking sector.

Adoption is Growing

Many banks initially opposed the concept of cryptocurrency. After all, cryptocurrency represents decentralized finance (DeFi), which contradicts traditional finance systems. 

However, financial institutions can’t deny cryptocurrency‘s growing customer base and market appeal. Well-known organizations like JP Morgan and Goldman Sachs have begun experimenting with their own crypto and blockchain-based banking services

PayPal has also become one of the largest proponents of crypto.

“I really like Bitcoin. I own Bitcoins. It’s a store of value, a distributed ledger. It’s also a good investment vehicle if you have an appetite for risk. But it won’t be a currency until volatility slows down,” says David Marcus, CEO of Paypal

So it stands to reason that other banks will follow suit and introduce their own crypto services. 

Introduction of CBDCs

The concept of storing digital money on a blockchain network is too advantageous for federal governments to ignore. In fact, several world governments have already begun releasing central bank digital currencies (CBDCs).

A CBDC is essentially a digital representation of a fiat currency available to the general public. Some countries have their own digital fiat currencies, including:

  • Central Bank of the Bahamas (Sand Dollar)
  • Nigeria (Naira)
  • The Reserve Bank of India (The Digital Rupee)
  • The Bank of Russia (Digital Ruble)


The U.S. Federal Reserve is even considering this financial framework in the near future, but the advancement of this initiative would require congressional approval. 

Expanding Use Cases

Cryptocurrency in banking will eventually evolve to encompass more than simple transactions. Banks can leverage cryptocurrencies to provide loans, credit services, and insurance. 

For example, a credit union can offer blockchain-based loans that enable borrowers and lenders to connect directly. Both parties can then agree on interest rates and terms and conditions without needing a third party. 

Emergence of New Business Models

The widespread integration of cryptocurrency into modern banking will inevitably create innovative DeFi technologies. JP Morgan is beginning to explore new business models through their blockchain and digital asset unit, Onyx. 

The bank already enabled users to process programmable payments on the JPM Coin infrastructure, opening up new possibilities for blockchain in the banking sector

Successful Case Studies of Banks and Cryptocurrency

Crypto in banking isn’t a new phenomenon. Many banks have been working with crypto solutions for almost a decade. Here are some of the most successful case studies of banks using crypto.

Goldman Sachs

Goldman Sachs is one of the most crypto-friendly financial organizations in the world. They’ve recently launched a crypto trading desk for Bitcoin and Ethereum options. 

In addition, the bank is investing millions into exploring new proofs of concept around tokenization and further use cases in modern banking. 


Banco Bilbao Vizcaya Argentaria (BBVA) is one of the world’s largest financial institutions, headquartered in Spain. The bank is one of the first to introduce digital asset custody services and blockchain-based loan programs. 

This means that BBVA customers can securely hold their crypto assets and participate in revolutionary crypto lending services. 


UBS Group AG is a global investment firm providing financial services to customers in over 50 countries. UBS allows its customers to trade crypto ETFs in Hong Kong. 

In addition, the bank has launched UBS Tokenize, a financial solution that helps investors, distributors, and issuers tokenize RWAs. 

The U.K. Government

The U.K. government has remained steadfast in approving the crypto market. Regulations in this region, such as the Financial Services and Markets Act, are largely designed to hold crypto businesses responsible for accurate reporting, consumer safeguards, and protections. 

The U.K. allows all cryptocurrencies, NFTs, and digital assets to be bought, sold, and traded without overly restrictive legislation or scrutiny.

Accelerate Your Digital Asset Integration With AlphaPoint Labs

It’s becoming impossible for banks to ignore the growing popularity of the crypto market. Several financial institutions are already making headway in introducing crypto services to their customers. Fortunately, developing these crypto services from scratch is no longer necessary. 

AlphaPoint’s white-label solutions make it simple for financial institutions to embrace digital asset management. We offer advisory, development, and implementation services to help banks enter the crypto market quickly and cost-effectively.

Future-proof your bank with digital asset integration—request an Alphapoint demo today.

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