Bitcoin might be anathema to the majority of Wall Street banks, however, for small lenders in the U.S., the crypto market is a veritable money maker. Despite the uncertainty and lack of regulation in the industry, Main Street banks are jumping on the Bitcoin bandwagon and raking in huge revenues.
Main Street Banks Catching the Bitcoin Bug
The big banks on Wall Street have largely shunned the cryptocurrency market with only a few making tentative forays into the industry. This has paved the way for smaller banks to take advantage of the void created by the major players to dominate the arena. Banks like Silvergate, Cross River Bank, and Metropolitan Bank are offering their customers premium crypto-focused banking solutions.
According to the Wall Street Journal, Silvergate’s asset base increased from $978 million to more than $1.9 billion. A significant portion of this revenue growth came from the over 250 cryptocurrency firms supported by the bank. Main Street banks are offering crypto startups the ability to enjoy the convenience of banking support.
Genesis Global Trading is one of Silvergate’s crypto customers. Genesis specializes in cryptocurrency trading, and according to CEO Michael Moro, the firm appreciates the services provided by the bank. According to Moro, Silvergate is a big believer in his company’s mission, and that helps to foster an excellent working relationship. The Genesis Global CEO also went on to say that crypto companies need banks to remain in business.
Silvergate isn’t the only bank basking in the bountiful Bitcoin revenue. According to CEO Mark DeFazio, Metropolitan Bank has increased its deposits without having to incur the cost of opening new branches. The bank’s 2017 revenue more than tripled the earnings of 2016. DeFazio is of the opinion that there is a significant paradigm shift in the payments industry.
A Calculated Risk
Mainstreet Banks aren’t ignorant of the potential pitfalls of backing cryptocurrency firms. According to Alan Lane, the CEO of Silvergate:
Banking in this [cryptocurrency] ecosystem is not for the faint of heart.
The crypto regulatory waters remain murky and even the banks that back cryptocurrency firms tend to play it safe. Main Street banks like Silvergate and Metropolitan have to observe a watchful vigilance in their compliance with KYC and AML regulations. As a result, many of these banks reject clients that do not meet up with statutory standards. Even with the hurdles along the way, smaller banks still manage to attract crypto behemoths like Coinbase, Kraken, and BitFlyer.
The trend of small banks backing digital currency firms isn’t only limited to the United States. Major banks in Europe remain critical of Bitcoin and the crypto market in general. Thus, smaller banks like Falcon and Vontobel in Switzerland as well as Fidor in Germany and Bank Frick in Liechtenstein have embraced the crypto market, offering a catalog of useful products and earning huge revenues.