Cryptocurrency was almost designed to oppose traditional banking. Bitcoin existed to disrupt the global currency system, a decentralized digital currency free from control and manipulation. As with most creations, the reality changed over time. Bitcoin is now seen as an established store of value. Meanwhile, the blockchain technology that it established is uniquely suited to solve many of the banking industry’s persistent problems. As such, the past year saw the traditional financial world warming to the ideas of cryptocurrency.
Media darling cryptocurrency Ripple and their XRP token made great headway in integrating with bank networks. RippleNet and the associated product line are seeing widespread adoption in back end systems, helping to standardize the transfer process between disparate banks. Stellar and IBM are working towards banking solutions in remote locations. Perhaps most importantly, investment bankers are considering their options for capitalizing on cryptocurrency’s profit margins.
Cryptocurrency Assets Trading
Of course, laws and regulations are in place that make the integration of cryptocurrency markets a slow process. Once a notorious hotbed of illicit trades and dark web transactions, cryptocurrency is only now escaping that sordid past. Voluntary KYC and AML regulation compliance are becoming the norm, and that goes a long way towards allowing accredited investors to get involved. However, for the average investor, it’s either direct investment by purchase or the nascent derivatives market.
Grayscale Bitcoin Investment Trust (OTCQX: GBTC) is one of the first major options for investing in cryptocurrency through the traditional market. GBTC allows investors to profit from the value of Bitcoin without investing in cryptocurrency directly. They are offered the protections one would expect from traditional investments, while also being publicly quoted. Yet this is only one company on a single exchange, while we are now looking at the full opening of the cryptocurrency market to traditional exchanges.
Goldman Sachs and Nasdaq
Goldman Sachs (NYSE: GS), one of Wall Street’s largest investment firms, is reportedly opening a training desk for the cryptocurrency market. As with any new investor, there’s a learning curve to be met and problems to be ironed out. Goldman Sachs’ cautious approach is completely understandable. This is good news for both average investors looking to get involved in cryptocurrency, and those already in the market. Goldman Sachs could bring a tremendous amount of money into the industry, while helping to dispel persistent regulatory concerns.
Tech-heavy exchange Nasdaq recently stated that they would like to incorporate cryptocurrency as well. However, they added the caveat that the market would need greater regulation and less volatility. Many governments are still struggling through the process of deciding what cryptocurrencies are – let alone how to properly regulate them. Nasdaq is fully committed to supporting the cryptocurrency market, partnering with the Winklevoss Twin’s Gemini exchange.
Early last year, it would have been inconceivable for either Goldman Sachs or Nasdaq to get involved in the cryptocurrency market. The fact that both are now in the process speaks volumes about the progress that the industry has made through the past calendar year. As the market matures, more traditional financial institutions will certainly get involved – proving that those involved already are still the earliest of adopters.
Article By: Adam Stone