Major U.S. Banks Are Making a Push into Cryptocurrency Services
Major U.S. banks are moving into the cryptocurrency services space, as they take advantage of more relaxed regulations to offer custody services for large investors and traders. According to a report by The Information, big banks such as State Street (STT), BNY Mellon (BK), and Citigroup (C) are preparing to offer digital asset custody services, which would enable them to securely store cryptocurrencies for their clients. This initiative may pose a threat to the current dominance of crypto-focused firms in the custody sector.
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Traditional Banks Enter the Crypto Custody MarketPush into Crypto Custody Services: State Street, BNY Mellon, and Citigroup are leading the charge by preparing to offer cryptocurrency custody services.Targeting Large Investors: These services are primarily aimed at institutional clients, such as hedge funds and endowments, which could potentially bring substantial capital into the cryptocurrency market.Market Impact: The entry of traditional banks could disrupt the dominance of crypto-focused firms in the custody space and provide greater institutional involvement in the market.Potential Boost to the Cryptocurrency MarketInstitutional Capital Flow: The move by banks could significantly increase the flow of capital from institutional clients, potentially helping to grow the cryptocurrency market, which is currently valued at around $3.2 trillion.Exploring Other Crypto Services: In addition to custody services, banks are also exploring other crypto-related services such as trading and lending, although these areas will likely face more regulatory scrutiny.Strategic Partnerships with Crypto FirmsCollaborating with Crypto Firms: As banks expand into the crypto space, they may collaborate with established crypto firms to develop the necessary infrastructure or outsource certain services.Coinbase Talks: For example, Coinbase is reportedly in discussions with several U.S. banks to explore potential partnerships in the crypto services arena.Crypto Firms’ Response: Crypto firms are exploring ways to avoid being squeezed out by traditional banks and are urging regulators to allow banks to outsource aspects of crypto custody and trading to crypto firms.Which Bank Stock Is the Better Buy?
Turning to Wall Street, analysts have a positive outlook on some of the bank stocks mentioned:
State Street (STT): Analysts are particularly bullish on STT, with an average price target of $113.42 per share, suggesting almost 14% upside potential.Citigroup (C): On the other hand, Citigroup’s average price target of $88.86 indicates a more modest 5.6% gain potential.Important HighlightsBank Stocks Outlook: State Street is considered to have the highest growth potential among the three banks, with analysts favoring it over the others.Market Impact: The push by traditional banks into cryptocurrency services could be a significant turning point for the industry, potentially driving up the market’s value and increasing institutional involvement.Regulatory Landscape: As banks enter the crypto space, they will likely face regulatory challenges, especially in areas like trading and lending, which could require careful navigation.
The move by major U.S. banks into the cryptocurrency services sector marks a new phase for the market. While offering opportunities for growth, these changes also come with challenges and regulatory hurdles. Investors should keep an eye on how these developments unfold and evaluate the potential of the bank stocks involved.