Financial institutions and crypto-related companies

Crypto-related companies in the U.S., as well as other countries, struggled to find banks that are willing to work with them. Opening a bank account does not mean that the bank changed its decision. There are cases when banks closed the accounts which belonged to crypto-related companies without warning. The reason why this is happening is the perceived risk of cryptocurrencies.

Crypto-related companies in the U.S., as well as other countries, struggled to find banks that are willing to work with them. Opening a bank account does not mean that the bank changed its decision. There are cases when banks closed the accounts which belonged to crypto-related companies without warning. The reason why this is happening is the perceived risk of cryptocurrencies.

It is not an easy task to find a bank that is willing to cooperate with crypto companies. In this situation, it is not surprising that there is a huge demand for so-called crypto-friendly banks. One bank which is working with more than 700 crypto-related companies is Silvergate Bank. This U.S. realized the importance of this industry and is actively working in this direction. Moreover, this bank is quite successful and earlier this month listed its shares on the New York Stock Exchange.

Hopefully, Silvergate Bank is not alone, and step-by-step other financial institutions are willing to work with the crypto firms. One such institution is the U.K.-based Cashaa, which is a banking service platform.

Starting from November 25, customers will be able to open bank accounts in the U.S. This news is a huge step forward for U.S. crypto companies as it will be easier to work in this industry. It will be possible to receive full banking services. Also, crypto-related companies will have the opportunity to do business with every country in the world, apart from sanctioned states.

U.K.-based Cashaa partnered with Metropolitan Commercial Bank to develop this service.

The Indian government and crypto regulations

The good news regarding digital currencies is that the Parliament of India will not discuss the crypto ban in the winter session.

Discussions about the possible ban started a long time ago. On November 14, the winter session agenda became available. According to the information, the draft bill named “Banning of Cryptocurrency & Regulation of Official Digital Currencies is not on the list.

It is important to mention that, the House of the People is the lower house of India’s bicameral parliament. The winter session of the lower house began on November 18 and will end on December 13.

For years, the idea that traditional finance institutions would invest in bitcoin (BTC) was laughable. But as of mid-2020, the institutional presence in the cryptocurrency became a reality. Many cite the foray of “the suits” into crypto as a contributing factor to the latest bull run that began in late 2020 and ended in late 2021.

Institutional interest in the cryptocurrency market excites current investors because institutions bring in fresh money, and certainly more money than retail can pour in.

Bitcoin, the largest cryptocurrency by market cap, is the gateway – and indeed the only stop – for many institutions that ventured into the cryptocurrency market. As of June 2022, 6.47% of all bitcoin that will ever exist is held by institutions, a broad category that includes ETFs like VanEck in Canada and sovereign governments like El Salvador.

Although bitcoin is often the first and the final step for major institutions, experimental institutions have recently stepped into other parts of the crypto industry. NFTs and the metaverse are two intertwined sectors in which institutions actively invest – rather than just passively investing in a cryptocurrency like bitcoin.

Bitcoin

The most straightforward way of investing in crypto for institutions is to hold cryptocurrency on their balance sheets.

The institutional presence in crypto began in earnest when MicroStrategy, helmed by Bitcoin maximalist Michael Saylor, bought $250 million worth of bitcoin in August 2020, followed by an additional $175 million in bitcoin one month later. MicroStrategy’s big step was followed by payments processor Square’s $50 million BTC purchase in October 2021 and EV manufacturer Tesla’s $1.5 billion BTC in February 2021.

The first mover continues to be the biggest holder. MicroStrategy owns 129,218 BTC in its stashes, accounting for 0.615% of the 21 million bitcoin that will ever exist. Tesla comes in second with 42,902 BTC, or 0.204% of all the possible Bitcoin supply.

Institutional activity in crypto is a double-edged sword. In May 2021, Tesla reversed its decision to accept payments in bitcoin over environmental concerns after less than two months of trialing the cryptocurrency as a payment method for its cars. This about-face contributed to a large sell-off in the cryptocurrency market.

Bitcoin mining companies or groups, which receive bitcoin rewards for validating transactions on the network, are another category of institutions holding the largest cryptocurrency.

There are also indirect ways institutions invest in bitcoin. Exchange-traded funds, or ETFs, are the most common indirect form of investment. Although there are bitcoin spot ETFs in Canada and Europe, the financial instrument isn’t approved in the US. Instead, there are ETF-like instruments, like the Grayscale Bitcoin Trust, a closed-end trust that tracks the value of Bitcoin. (Grayscale Investments, which manages the trust, is a unit of Digital Currency Group, which also owns CoinDesk.) It had $18.5 billion worth of assets under management (AUM) as of June 2022.