Industry News

Will Bitcoin Put the Bite on Banks? - Barron's Blog


Teresa Rivas | Friday, October 6, 2017

Dow Jones Institutional News

No matter how you feel about Bitcoin and other cryptocurrencies, you'll find someone to back you up.

That's because there's far from consensus about these products in the financial world, with Wall Street CEOs divided on whether bitcoin is a fraud or the future. Even JPMorgan ( JPM) CEO Jamie Dimon's harsh words didn't prevent the bank from taking customer orders for bitcoin-related instruments. It seems that banks can't decide if it's an opportunity or the biggest bubble ever.

Perhaps part of the problem is that cryptocurrencies were created as a way to circumvent traditional banks, but now banks themselves want a piece of the action, as Bloomberg reports. But while customer interest is high and the promise of profits are tempting, there are a whole rash of concerns that come with dealing with cryptocurrencies:

Handling bitcoin would invite scrutiny from every major U.S. regulator...And banks need to avoid antagonizing governments that are increasingly concerned about this area. For instance, China is cracking down by shutting cryptocurrency exchanges.

Then there's the risk that stems from its high volatility and lack of correlation to other major assets.

Not to mention that bitcoin is the payment of choice for everything from drugs to ransoms and money laundering.

Nonetheless, where there's money to be made, it seems hard to imagine that banks will simply walk away. Just this week we got news of Goldman Sachs' ( GS) bitcoin venture, and the ETF industry is pushing ahead into cryptocurrencies.

The Bitcoin Investment Trust ( GBTC) is higher this morning and is up 476% this year.

This article was licensed through Dow Jones Direct.

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