Barclays has been talking to the Financial Regulators about how to bring cryptocurrencies like Bitcoin into play. Does this signify a sea change in the attitude of banks towards cryptocurrencies?
Traditional resistance towards cryptocurrencies
Banks are subject to strict Know Your Customer and Anti-Money Laundering Guidelines. Hence they usually shy away from being associated with Bitcoin and other cryptocurrencies, given Bitcoin’s reputation as a pseudonymous currency used in drug trades. In the past, banks have shut down accounts of Bitcoin-related companies, as these would involve enhanced monitoring and higher associated costs.
Talks with the FCA
In a refreshing change, Barclays has spoken to financial regulators, including Britain’s Financial Conduct Authority (FCA), about how cryptocurrencies can play a role in the existing system. Ashok Vaswani, the CEO of Barclays UK, told CNBC
“We have been talking to a couple of fintechs and have actually gone with the fintechs to the FCA to talk about how we could bring, the equivalent of Bitcoin, not necessarily Bitcoin, but cryptocurrencies into play.”
While regulators are open to suggestions, they are usually conservative on innovations like cryptocurrencies. As such, the opinions of existing established players like banks weigh heavily on their decisions.
Association with fintech firms
Banks have been associated with fintech firms and have looked at adopting Blockchain technology to cut costs. In April 2016, Barclays partnered with Circle when it launched its services in the UK. Circle, which is a social payment network backed by Goldman Sachs, received an e-money license in the UK. Banks and financial institutions across the world have come across to form the R3 consortium, to collaborate on Blockchain applications. It is only the association with Bitcoin that has been taboo for banks until now.
The way forward
With Bitcoin and other cryptocurrencies still at a nascent growth stage, banks can afford to ignore Bitcoin-based businesses now. Banks have blacklisted certain businesses like recreational marijuana, gambling and pornography, due to the reputational risks involved. Doing the same to Bitcoin-based companies would only shut banks out from business opportunities and make these companies self-reliant. They may even challenge the business models of banks in the future.