BoA Adopting Crypto is a Bad Omen for Financial Liberty
With cryptocurrencies continuing to gain more attention every day, big banks are flocking to the new asset class and major financial institutions are chasing the elusive gains historically provided by digital assets. It seems no one wants to neglect this innovation.
As attention encompasses the crypto industry, regulation is following close behind. Traditional financial companies are heavily regulated in nearly every aspect of business, while digital assets still possess a fairly free market—and that is why big traditional institutions entering the crypto space can attract much unwanted interest from regulators.
Bank of America Joins List of Big Banks in Crypto
Bank of America is the newest major bank to become involved with cryptocurrencies, reportedly establishing a full team to research the new asset class. This comes as a surprise to many, as BofA has historically been against crypto. In March, a researcher from the bank made bold statements against the success of BTC.
“As such, the main portfolio argument for holding Bitcoin is not diversification, stable returns, or inflation protection, but rather sheer price appreciation, a factor that depends on Bitcoin demand outpacing supply.”
Now, all of the top five US banks by market cap are involved in crypto in one way or another. Starting as early as 2019, JP Morgan was making large moves toward joining the digital asset atmosphere. Citi and Goldman Sachs are no strangers to the crypto world, having made huge investments into growing their digital asset teams.
While Wells Fargo is the laggard of the group, the bank does offer crypto exposure to large clients via crypto funds. All of this is not unexpected as cryptocurrency can be very profitable and financial giants can use it to recover their 2021 losses.
Traditional Finance Could Hurt Crypto
While the big money coming from large institutions is great for crypto growth, it is introducing a new element of centralization. Bitcoin is often referred to as ‘freedom money’ due to its unregulated and completely anonymous nature.
These features of privacy have been a major pull for most early crypto adopters. Now, Elizabeth Warren is pushing the SEC to publish regulations on crypto exchanges by the end of this month.
Additionally, the introduction of large-scale money into cryptocurrencies has the potential to create large shocks. Bank of America claims that it only takes $93 million to move BTC a full 1%—and seeing as big banks aren’t averse to market manipulation, this might be a cause for concern.
With Bitcoin having a market cap more than double that of Ethereum, large investment into smaller coins could cause major market manipulation. For example, the tenth-largest crypto UNI has a market cap of $11 billion; a mere 1.75% of Bitcoin’s market cap. Any large investment would make major movements in the market.
Centralized financial corporations continue to become more involved in crypto. Are you excited that crypto is becoming more widely recognized, or nervous about the loss of security and privacy? Let us know in the comments!