Bitcoin’s eight-fold surge in value this year is forcing Wall Street banks to balance clients’ interest in speculating on the cryptocurrency with executives’ skepticism about its future.
When a coder locked $150 million of digital currency stored in Parity digital wallets last week, many bankers probably saw it as another reason to ignore cryptocurrencies. Instead they should recognize the business opportunity (key custody) that the incident presents.
CME Group plans to offer bitcoin futures contracts by yearend, a sign that financial institutions may be getting ready to trade financial products tied to digital currencies.
Cryptocurrencies will not gain widespread traction with corporations and governments as long as there remain crucial questions about their volatility, risk, volume and shadowy affiliations.
"Jamie Dimon gets paid to worry about bitcoin because he's a rent-taker," said Mike Novogratz, a former principal and macro fund manager at Fortress Investment Group. "The decentralized revolution is about going after the rent-takers."
Credit Suisse, State Street and several other banks are experimenting with a blockchain technology that could allow them to make corporate deposits more affordable to hold on their books.