For a number of reasons, major banks haven’t seized the opportunity to get involved with bitcoin. Banks like to participate in size, compliance has restrictions, and bosses don’t understand it. But these hurdles will be overcome in 2015.
While the world took notice of Bitcoin in 2014, the banks — normally jumping out of their seats at opportunities to make a profit — have sat on their hands. Individual financial advisors are eager to take part in the burgeoning opportuinity — as made clear by the hundreds of such professionals that have taken courses on Bitcoin at the Digital Currency Council. But the firms writing their paychecks are more conservative.
In December 2013, Bank of America’s David Woo wrote the first report on Bitcoin by a major financial institution, with many of its peer firms following suit in the 12 months since. The Bank of England, in a quarter four 2014 report, noted that Bitcoin is “a significant innovation” with “far reaching implications.” The most senior executives at the financial giants are discussing Bitcoin and many have launched internal Bitcoin task forces to give due consideration to the opportunity and the risks.
What’s holding the banks at bay?
No question the banks see an opportunity to profit. So why are they sitting on their hands? Here are four reasons:
1. Banks are in denial about Bitcoin’s impact on their existing businesses
The banks have been capitalizing on the inefficiencies in the current monetary system for years. They’ve developed businesses that charge high rents for use of their infrastructure. The heads of those businesses aren’t going down without a fight. I would imagine there was a similar reaction from the managers of Blockbuster Video’s retail stores when Netflix arrived on the scene. At some stage, assuming they don’t want to join Blockbuster, Kodak, and other incumbents who took denial to the grave, these banks will have no choice but to stop denying and start adopting.