Collaboration of big banks and crypto could be a perfect match, says Animoca's Yat Siu

Big US banks have been making noise about embracing crypto and aiming for custody solutions
This evolving attitude comes amid a typical bout of volatility in the crypto market but finds strength in a pro-crypto US administration
Offering a web3 industry perspective, Animoca Brands’ founder Yat Siu discusses how traditional banking and crypto can find symbiosis

Crypto has had a mixed, fraught relationship with big banks and their regulators to say the least, particularly in the alternative asset class’s spiritual home – the US of A – where much of its focus lies.

You only have to go back to about midway last year when ‘Chokepoint 2.0’ – the term used to describe an alleged anti-crypto de-banking operation by the Biden administration and federal regulators – was still a major crypto-market-moving plotline and talking point.

With the likes of the frustratingly obstinate Securities and Exchange Commission (SEC) chair (now former chair) Gary Gensler and Senator “Anti Crypto Army” Elizabeth Warren roadblocking and attempting to beat down the industry at every turn, crypto in the US has faced an ever-building existential threat over the past few years.

But all that swiftly changed when Donald J Trump, the self-proclaimed “first ever crypto president”, swept his way to power for another term in the White House, sending Bitcoin, if not altcoins at large, soaring, to an all-time high of US$108k.

Not that Trump 2.0 has been all smooth sailing for the crypto market so far – the past week or two has certainly been yet another brutal and testing time for crypto bag hodlers. But that’s another story.

The social-media-fuelled sentiment has been fearful across the highly emotional cryptoverse this month as global markets take a beating, but let’s just remind ourselves who Trump and his fellow Bitcoin-holding vice president JD Vance have been gathering into crucial financial positions…

Treasury Secretary Scott Bessent: a huge supporter of cryptocurrencies, in particular Bitcoin.
Commerce Department chief Howard Lutnick: the billionaire chairman of Wall Street firm Cantor Fitzgerald, and a raging Bitcoin bull.
SEC Acting Chairman Mark T. Uyeda: is innovation and crypto-friendly and is establishing a Crypto Task Force led by SEC Commissioner Hester “Crypto Mom” Peirce to fairly regulate the industry in the US.
Crypto Czar David Sacks: a former PayPal exec and venture capitalist and another big Bitcoin believer. And yes, that’s his real job title in a role establishing a crypto “working committee” discussing, among other things, a potential US Bitcoin Strategic Reserve.
Acting Comptroller of the Currency Rodney Hood – okay, this is getting boring now; he’s been historically crypto friendly in former roles including chairman of the US credit-union watchdog.

And everyone’s bearish right now?

Big US banks are joining the crypto party

US banks, and in fact most big banks globally including here in Australia, have traditionally been very wary about engaging with crypto companies amid an uncertain regulatory environment, not to mention concerns about cryptocurrency volatility risks.

A policy in the US that contributed to this has been the SEC’s Staff Accounting Bulletin (SAB) 121. This stifling rule required banks to classify customer-held crypto as liabilities on their balance sheets.

Despite SAB (which Trump has pledged to repeal by the way), there have been certain big American banks and financial institutions in crypto’s corner for a good while, including the oldest bank in the States, BNY Mellon, and the world’s largest asset manager BlackRock, among others.

And this narrative only appears to be growing.

For example, reports emerged this month that Goldman Sachs had amassed about US$2bn worth of Bitcoin and Ethereum ETFs in Q4 last year.

And as a Barrons’s article recently noted, “banks that were shut out of the industry are poised to join it, vying with firms like Coinbase Global, Robinhood Markets, and BlackRock for a piece of the crypto pie.

“The Federal Deposit Insurance Corp. plans to revise bank guidelines for crypto, aiming to allow banks to embark on some crypto activities without getting regulatory permission first.

“Some banks have met with government officials to push for offering custody of crypto assets, along with ‘tokenised deposits’ that could put some checking accounts on blockchains, according to a person familiar with the matter.”

Yat Siu, co-founder and executive chairman of Animoca Brands – one of the most prominent and broad-reaching global web3/crypto technology and venture capital firms – believes that the changing, pro-crypto, Trump-led US regulatory landscape, presents “significant opportunities for traditional banks and financial institutions to engage more deeply with web3 and blockchain technology”.

In commentary he shared with Stockhead, Siu noted that the entry of large banks into the crypto space would also provide various benefits to the web3 industry.

“As banks start to provide more crypto services including custody and transfers, that means that businesses all over the world will have an interest in being able to transact in cryptocurrencies,” said Siu.

“And that will require appropriate regulation and financial rails – countries without such preparedness will have to scramble to adapt or lose out.”

Just another form of payment?

Various notable big bank bosses in the US have been piping up about crypto recently.

At the World Economic Forum in Davos, Switzerland held in late January, Bank of America CEO Brian Moynihan told CNBC:

“If the rules come in and make it a real thing that you can actually do business with, you’ll find that the banking system will come in hard on the transactional side of it.”

Ted Pick, CEO of wealth management big gun Morgan Stanley also told CNBC in Davos that his bank was looking into how it could be more involved in crypto markets.

“For us, the equation is really around whether we, as a highly regulated financial institution, can act as transactors,” said Pick, adding: “We’ll be working with Treasury and the other regulators to figure out how we can offer that in a safe way.”

Moynihan noted that he views crypto as potentially “just another form of payment” alongside existing methods such as “Visa, Mastercard, debit card, Apple Pay.”

Animoca’s Yat Siu, however, sees banking and crypto collaborations as offering more than a mere payments solution.

“With traditional banks embracing crypto, there’s an opportunity to balance the innovative spirit of crypto with the trust and stability associated with established financial institutions,” he said, adding:

“The integration of crypto services by banks, such as custody for crypto assets and tokenised deposits, represents a significant and historical shift in the banking industry.

Siu believes that a blend of traditional banking and digital asset services will foster the creation of a broader range of innovative solutions for banks’ customers.

“As banks enter the web3 space, a new model of competition and collaboration could emerge between traditional financial institutions and crypto-native companies.

“Now that views and regulations of crypto are changing, banks will expand their attention to providing services to the web3 industry. This interaction holds the potential for novel financial products and services that benefit the broader economy.”

‘A more resilient crypto ecosystem’

Furthermore, noted Siu, the diversification of crypto deposits through traditional banking has a potentially overlooked benefit.

“The potential redistribution of crypto deposits across larger banking entities might mitigate the risk of future bank runs, as seen with the collapse of FTX affecting Silvergate,” Animoca’s boss explained.

“This diversification could foster a more resilient crypto ecosystem.”

And touching on what already appears to be happening regarding a shift in approach from US federal financial regulators, Siu added that “the involvement of traditional banks in web3 could lead to a global reevaluation of crypto regulations and banking practices.”

This, he concluded, would emphasise “the need for international cooperation and harmonisation of crypto regulations and standards”.

While Animoca Brands is a Stockhead advertiser at the time of writing, it did not sponsor this article.