The CEO of Ripple, Brad Garlinghouse is saying that custody services for Cryptocurrencies such as XRP will become a dominant Bank product from 2019. This raises the concerns of centralization given that banks’ involvement of in financial transactions is the very challenge that Blockchain and Digital currencies were meant to address in the first place.
The CEO of Ripple is attributing this development to various factors such as rent-seeking behavior by banks, and the growing confidence by institutions on the regulatory frameworks being instituted all over the world.
Banks Will Be Seeking To Diversify Their Products
While speaking to an audience at the 2019 Singapore Tech Festival, Brad Garlinghouse insinuated that banks have always been looking to offer as many products as possible while they cushion themselves from risks.
Cryptocurrencies are one of the areas that the banks are yet to tap fully and it is a high time that most management teams are realizing the vast opportunities in cryptocurrencies. Additionally, with a market capitalization of more than 100 billion USD, banks are starting to realize that Cryptocurrencies and the entire Blockchain technology industry at large are here to stay with a high probability of exponential growth in the future.
Desire For Profits
Security is among one of the most dominant concerns among Cryptocurrency holders. This is due to the growing prevalence of cyber hacking that has led to the loss of Digital Assets worth hundreds of millions of dollars. Due to rent-seeking behavior, banks will be offering Crypto custodial products to the wide base of clients.
This event will mark an end to the conservative nature of the banking industry and the models of operations in both the two industries that were designed to complement each other completely. In the new business strategy, Cryptos and Banking will be intertwined and complementary to each other.
Regulatory Uncertainty On Cryptos Is Being Corrected
Many countries are instituting mechanisms of creating policies to govern Cryptocurrencies and the emerging Blockchain technology. With expectations of a well-governed and certain regulations, banks can be able to participate in Crypto markets activities.
Despite Crypto trading ban for financial institutions in countries such as India and China, other countries such as the USA, the EU, UK Japan, South Korea, Canada, etc. are currently drafting laws to govern and encourage the growth of the Digital Asset industry.
Further, the recently concluded G20 Summit in Buenos Aires, Argentina reaffirmed their position of fostering the enactment of Crypto-friendly ways to protect investors and encourage innovation in the DLT space. Hence, banks will have confidence and a legal ground to engage in Cryptocurrency trading.
Contradicting Cryptocurrency Principles?
In Hong Kong, there are rules in place that require Crypto exchange platforms and Crypto portfolio management firs to deposit their client’s Cryptocurrency wallets to custodial platforms for security. It is yet to be seen whether many banks will operate under this model. However, the product can be designed to secure Cryptocurrencies in cold wallets modeled like traditional vault systems.