Companies like Tesla and MicroStrategy are investing billions in the world’s first cryptocurrency, Bitcoin. This investment may signal long-term support for crypto and blockchain, and global banks are taking more notice of cryptos. The involvement of global banks may be important for those with Bitcoin IRA accounts because cryptocurrencies like Bitcoin, Ethereum, and Litecoin may grow in price as they grow in popularity and trust partially thanks to banks.
Improving the Banking Process with Crypto
Banks are researching stablecoins, which are cryptocurrencies tied to other assets, like USD or gold, which help them avoid volatility. Some banks may want to use stablecoins to improve typical banking processes, increasing their speed and reducing fees. While they may not be the best cryptocurrencies to invest in for-profits, stablecoins are ideal for transferring and possibly maintaining value over time.
J.P. Morgan’s JPM Coin is a good example of this. Every JPM Coin is equal to one US dollar. A customer at a bank utilizing JPM Coin could have a more streamlined experience than one without it. If that customer wants to make a transaction, they will convert their desired amount of money into JPM Coin. The bank can then transfer the stablecoin to the recipient anywhere in the world almost instantly and with little to no fees. Then, to complete the transaction, the recipient could convert the JPM Coin to whichever fiat currency is available. The company is also preparing an actively managed Bitcoin fund for its users.
One of the most significant improvements with cryptocurrencies and stablecoins is the transfer times. International bank transfers take days, if not weeks, to complete. Blockchain-based transactions streamline the process, ensuring it can be done in as little as a few seconds.
These enhancements have attracted the likes of Signature Bank, Bank of America, and Citigroup. Signature has offered “real-time payments” to commercial clients since 2018 via its Signet platform. Bank of America now works closely with international payments project Ripple. Citigroup CEO Michael Corbat claims they’ve been working with governments to build digital currencies. Corbat claims sovereign currencies are “inevitable.”
Banks are in the process of creating or at least getting involved with cryptocurrencies. As banks and other institutions support crypto, these assets may increase in demand and price.
The Future of Banks and Blockchain
Payments and transfers could be just the start of how cryptocurrencies and blockchain could evolve the financial industry for the benefit of investors and consumers alike. When it comes to traditional banks, the average savings account rate is 0.05% annual percentage yield (APY). There are other ways to hold your money besides low-interest bank accounts. For example, we offer up to 6% APY on cash and cryptocurrencies with our IRA Earn program.
When banks see the current growth in crypto lending, they may follow suit and get involved, if they aren’t in process of doing so already. While it’s a bright future for bank customers, the reality is that it may be years before this becomes a regular offering from traditional banks.
That said, many banks are preparing for a blockchain-based fate. Not only in the United States, but across the world. This year, China’s central bank is offering 40 million yuan via its digital currency, the DCEP. Their goal is to make DCEP a potential replacement for typical cash.
European banks have been pushing blockchain for years now. HSBC and ING facilitated a cross-border blockchain transaction in 2018, for instance. Switzerland has long been the home for aspiring blockchain startups as well. The country houses 130 startups as of early 2021, many of which relate to the banking and financial sector.
These developments will hopefully start in the United States sooner rather than later. In January, the US Treasury gave the go-ahead for banks to settle payments on the blockchain. Furthermore, President Biden’s new head of the SEC, Gary Gensler, teaches blockchain at MIT. That knowledge may translate over to new crypto-focused regulation in the new year.
Cryptocurrencies and blockchain appear to be the next step for many banks. These institutions may be scrambling trying to learn how to invest in blockchain. Cheaper and faster international payments should be an instant selling point, and that’s before mentioning lending and blockchain’s other benefits.
As cryptocurrencies and blockchain technology become adopted by more banks, more people may become aware and capable of investing in Bitcoin. What this means is cryptocurrencies may become more desirable in the future, potentially leading to cryptocurrency IRAs becoming more profitable to invest in. If you’re interested in investing in cryptocurrencies like Bitcoin or Ethereum, consider signing up for a Bitcoin IRA today.
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