Wall Street is going to expand their crypto operations to epic proportions. No longer are the likes of Coinbase and Circle going to be the big fish. We are about to see the major whales entering.
When it comes to size, few can match Wall Street. When we mention names like Blackrock, Fidelity, and State Street, we are talking about firms with trillions of assets under management.
Crypto could make this number go up.
With a renewed optimism that came from Trump getting elected, followed up by personnel who are pro-crypto assuming positions of power, the belief is that we are going to see an environment that is fertile for anyone involved in crypto. This is not an opportunity that Wall Street will overlook.
For this reason, they are getting ahead of the curve. Many are expecting regulations providing the framework. Like much of what takes place on Capitol Hill when it comes to bills, a fair bit will be written by the banks.
This is something they will leverage.
Not your keys, not your crypto.
This is a long established motto within the cryptocurrency industry. It is also going to be rather meaningless in a couple years. WIth the largest players getting involved, they will gobble up cryptocurrency.
We already saw the impact that Blackrock had with the Bitcoin Spot ETF. It is one of the larger holders of Bitcoin, albeit on behalf of their clients. Nevertheless, they people have no access to the coin itself. That is firmly under the control of Blackrock (and their custodian).
Now we see how State Street is looking to become a custodian itself. As it notes, the bank is already an administrator of Bitcoin ETFs. This will take things to the next level.
State Street, a large custodian bank with a footprint in crypto, plans to launch a digital asset custody business next year, according to a report from The Information. The move represents something of a step change for Wall Street banks, which have so far been mostly unwilling to handle crypto directly.
It also comes shortly after the U.S. Securities and Exchange Commission canceled a controversial accounting bulletin, SAB 121, which required that companies holding crypto assets on behalf of their customers must record a liability and corresponding asset on their balance sheet.
The banks were unwilling to get involved directly due to a series of regulations that were penalyzing them. This is no longer the case. Over the next year, Wall Street is going to immerse itself in crypto, with banks having it on their books.
This is complimented by Jerome Powell, Chair of the Federal Reserve, stating that his view is the banks can decide whether they want in on crypto or not. In other words, The Fed is hands off. It is up to the banks to determine the degree of risk.
Do you hear the floodgates opening?
Is this good news for crypto?
I guess it depends upon the point of view one has. Since most only care about green candles and price go up, it is probably a positive. We will see buy demand on many tokens, especially the majors ones like Bitcoin and Ethereum.
From the decentralized and distribution point of view, it might not be so great. This will further consolidate things into the hands of centralized institutions. As we saw with the Bitcoin ETF, Wall Street can move some big numbers into these assets.
It is contrary to Web 3.0 in my opinion. We might actually see this emerge outside the largest coins and tokens. It will be the spreading across many different applications that attains the distribution. These are likely things Wall Street ignores, at least until they become extremely successful.
Another way to look at it is through the venture capital lens. VC firms are the early investor into companies that end up going public. Major Wall Street firms do not get involved until things are going public. This is what tokenization will provide.
Anyone has the opportunity to be involved in start ups similar to VC firms. They can get in early and watch the platform grow in value. At some point, the larger players will enter, looking to profit.
The early adopters will have already rode the value up, enhancing their holding. If smart, they can sell into Wall Street.
