Wall Street Begins Dabbling in Crypto While Some Hang Back

Wall Street is warming up to cryptocurrencies. Large banks and other financial institutions have been staffing departments ready to serve clients’ blockchain needs. Hedge funds and professional investment outfits led the way, with many mutual funds and pension managers now following along, lest they be perceived as out of touch. Some say the involvement of traditional investment sectors could add some stability to the often-volatile crypto markets, whose ongoing viability is hardly assured. Although Coinbase CEO Brian Armstrong thinks it is, predicting that at least one billion people will have tried crypto within a decade.

Speaking Monday at the Milken Institute Global Conference in Los Angeles, the cryptocurrency exchange chief said the projection is up from about 200 million people who have to date used cryptocurrencies. “My guess is that in 10-20 years, we’ll see a substantial portion of GDP happening in the crypto economy,” Armstrong said at the event, according to Bloomberg.

Armstrong’s Global Conference appearance — sharing the stage with Cathie Wood, CIO of ARK Invest, one of Coinbase’s biggest investors — coincides with roiling crypto markets. In November, Bitcoin hit a record high of nearly $69,000 only to drop by almost 20 percent in Q1. But some remain sanguine amidst the turbulence.

“Firms such as Fidelity Investments and Cowen Inc. have started storing and trading cryptocurrencies, either on their own or through ventures with digital-asset startups,” reports The Wall Street Journal, noting that “Last week, Fidelity announced plans to allow individual savers to add Bitcoin to their 401(k)s.”

The U.S. Labor Department expressed concern, saying the move will put Americans’ retirement security at risk. “BNY Mellon and rivals such as State Street Corp. are building capabilities to store and trade Bitcoin and other digital assets while they await U.S. and state regulatory approvals that they say will allow them to go live with those services for institutional clients,” which they expect to happen by the end of the year, WSJ reports.

But not everyone is onboard. The Goldman Sachs Group has said it would like more regulatory guidance before they directly handle cryptocurrencies. But Goldman has been executing some limited trades, and “also recently made a loan that was secured by the borrower’s Bitcoin holdings,” writes WSJ. However, “crypto skeptics can still outnumber the crypto curious,” the news outlet reports, noting that both Berkshire Hathaway CEO Warren Buffett and JPMorgan Chase CEO Jamie Dimon dismissed Bitcoin as worthless.

Damien Vanderwilt, co-president of Galaxy Digital Holdings, a firm that consults to digital-asset companies does some crypto investing of its own, told WSJ that when the old-guard asks what to do about crypto, “the answer for most banks is that the opportunity today is not big enough to take the reputational risks of being early.”

Related:
Crypto Is Winning and Bitcoin Diehards Are Furious About It, The Verge, 4/28/22
SEC to Hire More Crypto Cops to Fight Digital Frauds, The Wall Street Journal, 5/3/22
The New Way to Get a Tax Break: NFT and Crypto Donations, The Wall Street Journal, 5/2/22
The Wikimedia Foundation Has Stopped Accepting Cryptocurrency Donations, The Verge, 5/1/22