A recent study by management and financial technology consultancy Capco, indicates that traditional banks have the potential to lead the cryptocurrency industry, surpassing even established exchanges . The study which is titled “Demystifying the Adoption of Crypto Implementation and Digital Assets and the Risks for Banks” highlights the flourishing interest of banks in expanding their offerings and embracing crypto resources as part of the future financial system .
The Opportunity for Banks to Lead
Capco’s analysis indicates that banks view crypto assets as transformation projects that can generate returns and benefits . However the segment is still relatively new and volatile. It requires strong coordination between different areas particularly business and technology, to define viable use cases . With their regulated activities, trusted status and strong governance, regulated banks have the opportunity to leverage their value chains and lead in the crypto market, according to Alexandre Bueno, senior manager at Capco .
Enhancing Crypto Asset Portfolios
To succeed in this space, conventional banks will need to amplify their crypto asset portfolios with solid risk management and personalized services that cater to customer needs . The fintech B2B ecosystem can play a significant role in helping banks cryptı on cryptocurrency opportunities .
Challenges for Banks to Overcome
Though banks have the potential to lead the cryptocurrency sector, they must address certain challenges to fully utilize this potential . The study highlights key challenges and ways to overcome them .
Roadmap for New Business Projects: Implementing digital asset projects requires a multifaceted complexity roadmap strategy that can be applied to viable use cases . Given the evolving nature of the industry, financial institutions may not see immediate and obvious results .
Asset Platform Technology and Infrastructure: Centralized exchanges dominate the cryptocurrency market, however some operate without regulatory oversight . Banks, that is known for their focus on security and guarantee, can fill this niche by offering greater security and reliability . Choosing the right distributed ledger technology (DLT)/blockchain for strategic objectives is crucial for banks .
Operational Model, Interoperability, and Regulation Project: Traditional banking operating models face challenges when integrating crypto assets due to interoperability issues with blockchain . Adapting these models to run data from digital currencies requires layers of integration . Additionally traditional compliance processes and tools may be insufficient to assess and control related risks, necessitating forensics for tracking and preventing risky transactions .
Reliable Options and Key Management: Custody of digital assets involves secure storage and reliable access through private keys . Qualified crypto custodians can implement solutions for securely safeguarding assets, that include omnibus wallet accounts and segregated accounts .
The Road Ahead
While banks can potentially lead the crypto market, they must navigate these challenges and adapt to the evolving regulatory landscape . Building trust, enhancing risk management and providing personalized services will be essential for banks to capitalize on the opportunities presented by cryptocurrencies .
