With Bitcoin hitting the mainstream, it can seem like the crypto industry is finally done fighting for institutional adoption. But have you ever wondered which banks own Bitcoin? JPMorgan Chase holds over $200 million in Bitcoin ETFs and Morgan Stanley owns $270 million in Grayscale’s Bitcoin Trust, while Wells Fargo has only invested $141,817. Generally speaking, around 55% of the world's largest banks are now involved in Bitcoin and other digital currencies.
After listing the major banks that have declared Bitcoin holdings, we'll dive into the regulatory landscapes, explore how CBDCs are shaking up the financial world, offering a glimpse into the future of money. We'll also see how major banks are putting Bitcoin on their menus, learn about advancements like the Lightning Network, and weigh in on what the future holds for Bitcoin within the global financial system.
Which Banks Own Bitcoin Directly VS Via ETFs
When it comes to investing in Bitcoin, banks have more options than your average Joe. Before we delve into the BTC holdings of various banks, let’s explore the difference between the two biggest ways institutions trade crypto.
Direct Holding
For obvious reasons, direct ownership is the most straightforward approach. This approach makes sense for institutional holders who know how to keep their crypto safe and secure. It lets the bank retain complete control over its Bitcoin assets. Of course, that also means they have to shoulder all the risk. Banks that have invested in the infrastructure and staffing needed to maintain their crypto storage do so for the advantages of direct holding.
Some of the banks that have made the plunge into building that infrastructure are industry giants like Goldman Sachs and UK’s Barclays bank. This reflects their faith in the sector, which in itself speaks to a positive long-term sentiment.
ETFs
Imagine you’re looking to invest in gold but you don’t feel safe storing gold blocks at home. Luckily, banks have vaults that can store large amounts of gold. So instead of a 1kg block of gold, the bank offers you a paper slip that says you own 1% of a safe containing 100kg of gold. If the price of gold rises, you can profit as much as you would from an actual chunk of actual gold.
Sounds like a good deal, right? Well, Bitcoin ETFs are no different. By letting customers invest in Bitcoin without dealing with the headache of owning and storing the digital currency directly, banks can attract new, crypto-savvy clients.
Technically speaking, an ETF is an investment fund traded on stock exchanges. These funds can hold various assets, including stocks, commodities, or cryptocurrency. The ETF's structure involves holding Bitcoin or Bitcoin futures contracts and creating mechanisms that keep its trading price close to the net asset value.
Which is Better?
Banks have to carefully consider their approach to investing in Bitcoin, weighing the benefits and drawbacks of direct holding versus ETFs. Here’s why the question of which banks own bitcoin is more complicated than it may seem:
Control and Ownership
Banks that opt for direct ownership have full control of their Bitcoin assets, allowing them to leverage these assets and increase their lending capacity. This can yield obvious advantages in financial planning and asset management. On the other hand, it also means the banks bear full responsibility for securing and managing their Bitcoin, which comes with risks.
ETFs provide an indirect ownership model where banks hold shares in a fund tracking Bitcoin’s price, which enhances operational efficiency but comes at the cost of less control over the bank’s BTC. If Bitcoin prices surge or fall during off-market hours, banks are unable to use ETFs to take advantage of the price volatility until the markets open.
Regulation and Security
Banks must navigate a complex regulatory system to ensure compliance with ever-changing standards, including anti-money laundering and know-your-customer (KYC) regulations, as a result of direct ownership. This inevitably increases both costs and security risks, as banks must insure and protect their digital wallets.
Meanwhile, ETFs operate within a long-established regulatory framework. It is an investment vehicle banks are familiar with. By investing in ETFs, banks transfer the regulatory and security responsibilities to the ETF provider, which simplifies compliance and reduces operational costs.
Liquidity and Flexibility
Due to the decentralized nature of Bitcoin, holding large sums of it comes with certain liquidity challenges. Since selling large amounts of Bitcoin directly can impact market prices, direct ownership actually reduces liquidity. Banks have to offload their crypto slowly or risk lowering the price and selling at a loss.
ETFs, however, provide superior liquidity and flexibility, as they are traded on regular ol’ stock exchanges. That means banks get to buy and sell shares quickly and efficiently, without significantly affecting market prices. The only downside is that ETFs can only be traded when the stock markets are open.
Operational Efficiency
Managing Bitcoin holdings directly means developing a solid infrastructure, including compliance systems, security measures, and cyber-security upgrades. This can be expensive and complex, which is why most banks avoid direct ownership of BTC.
Investing in Bitcoin through ETFs makes things easier for large banks because the ETF provider handles all the infrastructure management. This saves money and makes trading BTC more streamlined for traditional banks.
Banks That Hold Bitcoin
It's amazing how quickly Bitcoin has caught on with institutions. For institutional players, it's gone from being an eccentric side interest to a mainstream financial instrument. Just think about it: over 65% of banks in the United States and Europe are already getting involved in cryptocurrency or blockchain projects. And it’s easy to see why everyone wants to get in on the action. The numbers are pretty incredible – blockchain transactions are averaging around $40 billion a day, which shows how much more widely it's accepted and used.
If this trend persists, it won't be long before we're no longer asking which banks own Bitcoin – it'll be easier to list the banks that don’t.
For now though, a few well established banks stand out in the crowded field of finance by officially declaring their investment in Bitcoin. Here are some of the biggest ones:
Chase Bank (JPMorgan & Chase)
$206 million – BlackRock, Grayscale, and Fidelity ETFs
The CEO of JP Morgan, Jamie Dimon, first became known to the crypto world for declaring Bitcoin a "fraud" in 2017. But when JPMorgan introduced its own digital currency two years later, it became impossible to deny crypto is here to stay. Half a decade later, the banking giant is a proud owner of millions in various Bitcoin ETFs.
Morgan Stanley
$270 million – ETFs, primarily through the Grayscale Bitcoin Trust
Morgan Stanley was the first American bank to offer clients access to three Bitcoin ETFs in 2021. For now, the option is limited to larger investors with a high risk tolerance and a multi-million dollar account balance.
Goldman Sachs
$120 million – ETFS & Bitcoin-related startups
Although the bank primarily deals with Bitcoin futures, its partnerships with firms like Galaxy Digital signal a broader interest in crypto. Thanks to this partnership, Galaxy Digital is slowly becoming a financial institution in its own right, with equity capital in the billions and an income of over $100 million per quarter.
BNY Mellon
$170 million – Direct BTC holdings, & investment products
BNY Mellon has been actively integrating digital assets into its asset management and custody services. Their goal is to create a seamless way for clients to trade Bitcoin right in their investments app. But recently the bank has pivoted, setting their sights on proprietary blockchain tech used for operations management rather than a new form of investment.
Barclays
$120 million – ETFs & direct Bitcoin holdings
Barclays has also been involved in several blockchain-based initiatives, further cementing its role in the crypto space. In particular, Barclays has participated in the funding rounds of various blockchain companies, including the crypto custodian Copper.
Standard Chartered
$180 million – Direct holdings and investments in crypto projects
The bank has partnered with digital asset custody provider Northern Trust to launch Zodia Custody, a cryptocurrency custodian for institutional clients. Standard Chartered has also been involved in several blockchain projects and has invested in companies like Ripple. The bank is optimistic about Bitcoin's future. Their head analyst made headlines recently, predicting that Bitcoin could reach up to $150,000 by the end of 2024.
Citibank
$150 million – Bitcoin ETFs.
Citibank has been gradually increasing its exposure to Bitcoin, reflecting its growing acceptance of digital assets.
Wells Fargo
$210,000 – Bitcoin ETFs.
During the first quarter of 2024, the bank's investment in Grayscale’s Bitcoin Trust amounted to $141,817. Coincidentally, BTC has risen steadily ever since.
Deutsche Bank
$50 million – Bitcoin ETFs
Deutsche Bank has been enhancing its crypto services, offering clients access to various Bitcoin investment products.
Why Don’t All Banks Hold Bitcoin?
Although the biggest banks in the US and Europe have jumped on the Bitcoin bandwagon, several notable holdouts still remain. Some financial giants are eager to reap the rewards of high returns and portfolio diversification. But others are hesitant about Bitcoin's notorious volatility, potential security breaches, and a complex regulatory landscape.
Let's dive a little deeper into the compelling benefits and daunting risks that shape the decisions of banks to either embrace or shun Bitcoin investments.
Benefits
Potential for High Returns
One of the most enticing benefits of holding Bitcoin is the potential for substantial returns, backed by historical data. There is no doubt that Bitcoin has demonstrated remarkable price appreciation over the years. Banks don’t want to miss out on a run like Bitcoin had in 2016, when prices surged from around $1,000 in early 2017 to nearly $20,000 by the end of that year.
As more and more big companies accept Bitcoin, and it's listed on stock exchanges like the Chicago Mercantile Exchange (CME) and the New York Stock Exchange (NYSE) futures markets, it's becoming more and more accepted as an asset class. This is constantly driving demand and potentially boosting BTC prices.
Diversification
Adding Bitcoin to a bank’s investment portfolio can significantly enhance diversification. Cryptocurrencies often don't move in line with traditional assets like stocks and bonds. In other words, when these other sectors collapse, BTC may remain stable or even increase in price.
Another reason people like Bitcoin is that it's seen as a hedge against inflation due to its limited supply of 21 million tokens. In an environment of increasing inflation and declining fiat currency value, Bitcoin's deflationary nature provides a safeguard, protecting the bank’s assets from inflationary pressures.
Staying Ahead of the Competition
By holding Bitcoin, banks show they're ahead of the curve and open to new tech. This strategic move can attract tech-savvy customers and investors looking for banks that are in tune with the digital economy. In the long-term, as more people and businesses start using and investing in cryptocurrencies, the banks that offer Bitcoin-related services will stay competitive and grow their market share. Not to mention that the increased trust and alignment with customer needs enhances the bank’s PR efforts.
Risks
Market Volatility
Increased potential returns also mean increased potential risks. In 2021, BTC dropped from about $64,000 in April to around $30,000 by June. These big swings can put banks holding Bitcoin at serious financial risk.
And let’s not forget – while BTC is generally considered liquid, extreme market conditions can lead to liquidity shortages, making it difficult for banks to buy or sell large amounts of Bitcoin without lowering the market price.
Security Concerns
Holding Bitcoin directly exposes banks to cybersecurity risks, including both hacking and theft. High-profile cybersecurity breaches, such as the Mt. Gox hack of 2014 are dangerous enough. But due to Bitcoin’s decentralized nature, transactions are not reversible, making stolen funds even more difficult to recover.
Regulatory Challenges
Crypto regulations are anything but regular. As new technology pushes the safety rails of finance to its limits, new standards are introduced, while existing ones are changed or removed completely. And that’s exactly why some institutions aren’t eager to invest in cryptocurrency – they’re wondering if next year’s regulations will make their adoption efforts obsolete.
At the same time, some banks are waking up to the fact that fortune still favors the brave. The largest gains will be reaped by those who invest early. So banks with a high risk-tolerance factor are looking into Bitcoin, while the rest are waiting to see how that works out.
The Future of Bitcoin & Banking
The future of Bitcoin depends on two things: how regulations change and how technology advances. As governments try to figure out how to regulate digital assets and innovators push the limits of blockchain technology, the future of Bitcoin will depend on these key factors.
Regulations
Making sure that banks stick to anti-money laundering (AML) and know-your-customer (KYC) rules can be expensive and time-consuming. But if they don't follow them, they could get hit with some hefty fines and damage their reputation.
United States
In the US, the SEC has adopted a stringent approach, treating cryptocurrencies as securities and enforcing rigorous oversight. Another government arm, called the Commodity Futures Trading Commission, regulates cryptocurrencies as commodities (this mostly applies to futures contracts). Meanwhile, the IRS classifies cryptocurrencies as property, subjecting transactions to capital gains tax.
Europe
The EU is set to implement the Markets in Crypto-Assets (MiCA) regulation, aiming to create a comprehensive regulatory framework across Europe. MiCA is expected to increase consumer protections, establish explicit standards for the crypto industry, and introduce new licensing requirements.
That being said, many European countries apply additional regulatory standards when it comes to crypto. For example, Switzerland famously maintains a more crypto-friendly stance, providing a supportive environment for blockchain innovation and cryptocurrency trading.
Australia
Australian regulations classify cryptocurrencies as legal property, requiring exchanges to register with the Australian Transaction Reports and Analysis Centre and comply with anti-money laundering and counter-terrorism financing obligations.
International
Accredited banks must adhere to Basel III standards, which mandate holding specific levels of capital (including cryptocurrency) to cover potential losses. These standards make sure banks are financially stable and reduce the risk of a system-wide crash by requiring them to have a solid capital foundation.
Technological Advancements
It's the latest tech that's making Bitcoin more and more appealing and usable, especially among financial institutions. These new developments are helping to overcome Bitcoin's biggest challenges, making it not just a viable option, but also an attractive one for banks and other major players in finance.
Lightning Network: Imagine a supercharged express lane for Bitcoin transactions – that's the Lightning Network. This layer-2 solution allows for off-chain transactions, slashing congestion on the main Bitcoin blockchain. Promising faster and cheaper transactions, the Lightning Network is set to make Bitcoin practical for everyday use, transforming it from a slow-moving system into a speedy alternative to bank transfers.
Security Protocol Improvements: Security is a top priority in the digital asset world, and Bitcoin is no exception. New cryptographic techniques, like Schnorr signatures and Taproot, have made Bitcoin much more private and efficient at processing transactions. Multi-signature wallets add another layer of security because they require multiple approvals to authorize a transaction.
Integration by Financial Institutions: The big guns in finance are increasingly cozying up to Bitcoin. Heavyweights like BlackRock and Fidelity are pushing for the approval of spot Bitcoin ETFs, offering a regulated and secure entry point for investors. These ETFs provide a way to gain Bitcoin exposure without the complexities of direct ownership. Meanwhile, financial giants like JPMorgan and Goldman Sachs have rolled out Bitcoin trading desks and custody solutions.
CBDCs
Experts predict CBDCs will be among the greatest drivers of cryptocurrency adoption.
Central Bank Digital Currencies are digital forms of a country’s fiat currency, issued and regulated by the central bank. Unlike decentralized cryptocurrencies like Bitcoin, CBDCs are centralized and backed by the government, providing a secure, efficient, and transparent means of conducting transactions.
- Financial assistance: CBDCs can help populations that have been historically underserved by banks. Rural communities and third-world countries in particular can really use the help. And low-income people in urban areas can also benefit from a free alternative to the traditional checking account.
- Decreased crime: Digital currencies cut down on transaction costs, and improve security for everyone by reducing the need for physical cash. As a result, a lot of common crime is eliminated in principle (e.g. thieves can’t rob a store if none of the revenue is kept there).
- Greater control: Governments can maintain greater control over monetary policy by leveraging the blockchain’s “public ledger” system. Authorities get to combat illicit activities more effectively when they’re able to track every purchase.
The introduction of CBDCs is going to change the financial ecosystem, and it might even change how people view and use cryptocurrencies. On the one hand, CBDCs offer centralized stability. On the other, Bitcoin and other cryptocurrencies provide decentralized privacy and independence. This difference is likely to result in a more defined set of roles for different digital assets.
● Bitcoin as "Digital Gold": Bitcoin is still a good place to store your money and an investment you can rely on, like digital gold.
● CBDCs for Everyday Transactions:CBDCs will be used for everyday financial transactions, as they'll benefit from government backing and regulatory oversight.
In Conclusion
Bitcoin's integration into the banking sector is quickly gaining momentum, as evidenced by several major banks making significant moves. Morgan Stanley leads the charge with $270 million in ETFs, reflecting its strategic embrace of digital assets. JPMorgan Chase has invested over $200 million in Grayscale’s Bitcoin Trust alone, while Standard Chartered is focused on emerging BTC-related innovations. Yet, it seems like these are just the pioneers of the industry, as the trend of institutional support for Bitcoin is just getting started.
As long-time supporters, we at PlasBit love to see technological advancements like the Lightning Network make Bitcoin more practical for widespread use. It’s exciting to see all the new security protocols bolstering confidence among industry giants. On a more general level, more people are asking which banks own Bitcoin as the regulatory frameworks become clearer, paving the way for its mainstream takeover. It’s a great time to dive into blockchain-based finance, and the biggest players in the traditional finance world know that as well as anyone.
