BNY Mellon’s crypto entrance seeks to bridge generational adoption gap

While the naysayers continue to wish for the so-called “Bitcoin bubble” to burst, the premium cryptocurrency continues to scale to new heights, seemingly with each passing day. For example, within the same week of Tesla announcing its foray into the crypto market, Bitcoin (BTC) proceeded to surge by almost $10,000. 

And even though the market subsequently faced a correction, things took a turn for the better as soon as news broke that BNY Mellon, the United States’ oldest private bank, entered the crypto fray, sending the largest digital currency by total market capitalization on an upward trajectory once again.

In this regard, the banking giant, with $2.2 trillion in assets under management and $41.1 trillion in assets under custody and/or administration, announced its decision to hold, transfer and issue Bitcoin and other cryptocurrencies as an asset manager on behalf of its clients, potentially exposing this asset class to an entirely new section of investors.

Another reason for the current momentum could be payments giant Mastercard announcing its decision to allow its user base to use crypto assets across its 30 million merchants. Additionally, on Feb 11, PayPal announced its plans to expand its recently introduced cryptocurrency offering into the United Kingdom market. Not only that, the company’s mobile service subsidiary, Venmo, also revealed that it’s looking to roll out digital asset services to its 29 million users sometime over the next few months.

What does BNY Mellon’s entry mean for the market?

As per reports, BNY Mellon is looking to manage cryptocurrencies using a platform that is currently in its prototype phase. In this regard, it has also been reported that the system will in addition be capable of handling a wide array of traditional holdings such as Treasurys and stocks.

It also appears as though the financial institution has not outlined which crypto assets it will be providing its custody services for. Furthermore, BNY Mellon has already deployed a team of executives, led by Michael Demissie, to spur the integration of cryptocurrency custody and management into the bank’s existing product suite.

Speaking with Cointelegraph, Hank Holland, founder and managing partner of private equity firm Pegasus Growth Capital and former managing director of Merrill Lynch, opined that as an established, trusted private bank and one of the largest custodians servicing registered investment advisers, BNY’s commitment to custody digital assets is a necessary, predicated step for broader investor acceptance and adoption of BTC and other crypto assets:

“The strategic initiative addresses two important obstacles. First, for the average investor who doesn’t want to manage a private key, BNY’s custody solution provides a familiar ‘on-ramp’ to own BTC. Second, for a financial advisor to recommend an allocation to BTC and digital assets, the investment needs to be on their platform. Thus, enabling them to charge an advisory fee.”

The first exposure for most of BNY’s clients, according to Holland, will be to buy BTC in order to incorporate the asset into their overall strategic allocation outlook. However, initial client purchases may be followed by other investments into an actively managed portfolio of diverse digital assets, as well as borrowing/staking strategies to supplement their regular income streams.

Similarly, Marcos Benítez Rubianes, client relationship manager for Gazprombank, told Cointelegraph that the news confirms the traditional financial system’s overall growing acceptance of Bitcoin — the oldest, most liquid crypto asset — adding:

“We have witnessed a cascade effect since Paypal announced the integration of crypto trading into their platform. Now in 2021; on one side, you have one of the most valuable companies globally, Tesla, acquiring BTC for their balance sheet and, on the other hand, the oldest bank in America, providing Bitcoin services to their clients.”

Additionally, Rubianes is confident that in the near future, more traditional players will embrace Bitcoin as an asset, maybe even as a payment means, especially because their clients will feel the need to stay abreast with the times and will pressure these institutions to provide them with increased crypto exposure.

Is a Bitcoin surge a foregone conclusion?

With Bitcoin now beginning to target the $50,000 threshold, it’s worth delving into the question of whether a rally may be looming on the horizon. On the subject, Antoni Trenchev, co-founder and managing partner of Nexo — a crypto exchange and lending service — told Cointelegraph that it’s one thing when a tech firm like Tesla embraces BTC, but it’s a whole new ball game when the oldest lender in the U.S. does it, adding: “Generational clashes are always fascinating to watch. Banks that follow suit, and many inevitably will, will simply be second.”

Rubianes believes that another surge may be in the cards if more financial incumbents take the step toward integrating crypto. If that happens, he believes that interest in the space could potentially increase tenfold. “Those in the crypto space understand quite clearly that one of the most significant barriers to crypto adoption has been, perhaps ironically, the self-custody part,” he added.

However, not everybody shares this narrative. Alexander Suhobokov, head of fintech at Switzerland-based Dukascopy Bank, told Cointelegraph that even though a gradual integration of the crypto and traditional financial industries is actively ongoing, and banks that don’t get with the times in the next one to two years will face a real risk of losing their competitive edge, it's highly unlikely that this news will have any major impact on BTC:

“There is a much greater chance that BTC’s value will be under harsh pressure as an externality of the regulators’ decisions on USDT. Let’s hope that these possible disturbances wouldn’t derail crypto’s potential.”

So, what should be expected from Bitcoin?

Following BNY’s, Mastercard’s and PayPal’s commitment to exploring the crypto landscape more closely in the near future, Twitter — home to Jack Dorsey, the man behind financial services firm Square — recently confirmed that it is looking to offer its employees the possibility of receiving their salaries in Bitcoin.

Not only that, the social media giant’s chief financial officer, Ned Segal, stated that the company is exploring the option of adding BTC to its existing balance sheets. However, he believes that much of this will depend on whether or not enough people are interested in conducting BTC transactions with the tech firm.

Lastly, Daniel Pinto, co-president of major U.S. investment bank JPMorgan Chase, stated in a recent interview that the company too will eventually have to get involved in Bitcoin.“The demand isn’t there yet, but I’m sure it will be at some point,” he added.

Overall, looking at the sentiment surrounding the space, it seems that there is confidence growing surrounding BTCs chances of reaching the all-important $50,000 psychological barrier, especially as the premier cryptocurrency continues to successfully stave off the bearish momentum that sent the digital asset’s value to as low as $46,110 over the course of the last 24 hours. As a result, BTC is once again sitting comfortably at around the $48,000 mark.