Bitcoin may be taking another step toward mainstream
adoption, CNBC has learned.
For the first time, customers of some U.S. banks will soon
be able to buy, hold and sell bitcoin through their existing accounts,
according to crypto custody firm NYDIG.
The company, a subsidiary of $10 billion New York-based
asset manager Stone Ridge, has partnered with fintech giant Fidelity National
Information Services to enable U.S. banks to offer bitcoin in coming months,
according to the two firms.
Hundreds of banks are already enrolled in the program,
according to Patrick Sells, head of bank solutions at NYDIG. While the firm is
in discussions with some of the biggest U.S. banks, many of the lenders that
have agreed to participate are smaller institutions like Suncrest, a California-based
community bank with seven branches.
“What we’re doing is making it simple for everyday Americans
and corporations to be able to buy bitcoin through their existing bank
relationships,” Sells said. “If I’m using my mobile application to do all of my
banking, now I have the ability to buy, sell and hold bitcoin.”
Until now, bitcoin adopters have relied on apps from a new
generation of fintech players like free trading brokerage Robinhood, payments
giants PayPal and Square, or crypto-centric firms like Coinbase. Banks, on the
other hand, have steered clear of bitcoin for retail customers, only recently
announcing plans to allow rich wealth management clients to be able to wager on
the cryptocurrency.
But banks are now asking for bitcoin because they can see
their customers sending dollars to Coinbase, Kraken and other crypto exchanges,
according to Yan Zhao, president of NYDIG.
“This is not just the banks thinking that their clients want
bitcoin, they’re saying `We need to do this, because we see the data,’” Zhao
said. “They’re seeing deposits going to the Coinbases and Galaxies and Krakens
of the world.”
Peer pressure
As hundreds of smaller banks sign on, giants like JPMorgan
Chase and Bank of America could face pressure to offer crypto to their retail
banking customers, according to Rob Lee, head of digital banking at Fidelity
National Information.
In March, Morgan Stanley was first among banks to offer
bitcoin funds to its clients, CNBC reported last month. Goldman Sachs quickly
followed with an announcement of its own, and JPMorgan is reportedly looking at
its own product in conjunction with NYDIG.
But in those cases, banks have relegated bitcoin to
ultra-high net worth individuals and family offices with tens of millions of
dollars.
“Most people can’t invest in things that institutional
investors get to invest in,” Zhao said. “With bitcoin available through your
bank to be purchased with as little as $1, now you have an attractive asset
that’s available to be owned by anyone in any amount. We think that’s huge for
economic empowerment.”
While Fidelity National Information, which is a vendor to
banks with nearly 300 million checking accounts, will handle the link to
lenders, NYDIG will take care of bitcoin custody and trade execution.
Disclosures will make it clear that it is NYDIG, and not the banks, that
handles the bitcoin, and the cryptocurrency won’t be FDIC-insured, according to
Zhao.
Fidelity National Information, based in Jacksonville,
Florida, caters to banks, providing access to services like chatbots or Apple
Pay. It’s also a heavyweight in the payments industry, and two years ago bought
processor Worldpay for $35 billion in the sector’s biggest acquisition to date.
Banks will determine how much to charge their customers for
bitcoin trades and will retain most of that fee revenue, according to Sells.
After rolling out the initial bitcoin product, NYDIG plans on other services,
including debit card rewards paid in bitcoin, and a new type of bank account
that is FDIC insured, but pays interest in bitcoin, he said.
More people would own bitcoin if they could do so through
their existing banks, according to a survey commissioned by NYDIG. That allows
them a single view of their financial assets and avoids the need to sign up
with another institution and fund the account with a money transfer that
typically takes three to five business days.
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