As some dive into the industry, they’re facing mounting competition. Large banks are still not yet trading Bitcoin itself, unlike many crypto firms, though some have ventured into its derivatives.
Goldman last year began offering trading in non-deliverable forwards, contracts which pay out in cash and cater to clients not yet comfortable with buying cryptocurrencies. By the time it launched, a number of hedge funds had enough confidence to just buy the crypto directly, according to a person familiar with the matter, who asked not to be identified discussing private information.
“It’s possible that you will see banks starting something, and then realize that by the time they got ready to launch, their clients’ interests have gone elsewhere in crypto,” Moro said.
Given the layers of legal, compliance, trading and technology work required, expanding into crypto was a “Herculean effort” for boutique investment bank Cowen Inc., which started its digital assets unit in March after a year of preparation, according to Drew Forman, who runs the division.
Besides wealth management, trading and advisory, a next step for banks could be wholesale lending to crypto firms, according to Damien Vanderwilt, co-president of Galaxy Digital Holdings, who sees this change coming by year-end. It would entail lending to crypto companies that provide the virtual currencies as collateral.
Whatever their moves, banks are being watched closely. A banking trade group said recent Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency requirements could make it harder for banks to develop offerings, handing crypto firms an advantage.
Biden’s recent executive order was seen as encouraging, but more guidance is needed before banks can move forward “in any significant manner,” said Nicholas Losurdo, a partner at law firm Goodwin Procter.
Wall Street is also trying to retain talent that’s leaving for the crypto industry, lured by potentially richer rewards, flexible work and front-row seats to innovation. Citigroup Inc. lost at least a dozen executives across the firm in the past year, including its recently appointed co-heads of the digital-assets group within its wealth-management division. They started their own crypto hedge funds this year.
The bank plans to hire 100 people in digital assets within its institutional business. A spokeswoman for the bank said it’s expanding its digital-asset capabilities and has made strategic investments to meet client demand.
One former Goldman vice president who made the leap to web3, the catchall term for crypto startups, decentralized finance and more, switched out his LinkedIn profile for a Bored Ape picture -- a famous nonfungible token. Ajit Tripathi is now an angel investor in crypto.
“It’s a way to signal you are a web3 native person,” he said. “You are one of the cool kids.”
This article was provided by Bloomberg News.