There is nothing more common in life than change, yet we tend to resist change at all costs. The banking industry is one sector of the business world that digs its heels in the most when it comes to change. I know this first hand, and as a member of this community I’ve made it my job to become more comfortable with change, not for the sake of it, but because it improves our business and provides better service to our customers.
One of the many financial endeavors that have been deemed risky by the banking establishment is the use of cryptocurrency. This digital currency has existed since the early 2000s and over the years more and more people and businesses have come on board. While, for the most part, the banking sector has kept its distance, some American banks have gotten on board and are leaving their mark on the world of digital money.
In 2019 JP Morgan announced that it had created its own digital currency called JPM Coin. Unlike the original cryptocurrencies, bank-run cryptocurrency is linked to existing currency (like the Dollar, Yen, or Euro). Where other cryptocurrencies have been known to fluctuate significantly, bank-run currencies tend to be more stable. Since each unit of (for example) JPM Coin is linked directly to a dollar in a JP Morgan bank account the transfer of funds internationally from one business to another is simple and fast. Here’s how it works: Customer 1 exchanges cash for JPM Coin, then sends that coin to Customer 2 via a secure and privately managed blockchain. Then, customer 2 withdraws that JPM Coin in the form of cash. This makes for fewer international transaction fees and allows money to be transferred immediately regardless of time differences.
However, there are limitations to the big banks’ willingness to play in the cryptocurrency field. And that has led to some big wins for some very ambitious local lenders. Silvergate Bank, located in San Francisco, was willing to take the risk and provide banking services for crypto-related businesses. They took on crypto start-ups that were doing legitimate business at a time when no one else would, and the risk paid off. They quickly doubled their assets under management to over $1.7 Billion. And they’ve seen this growth on the digital front without the added expense of opening up new branches.
When it comes to issues as complicated and sometimes risky as cryptocurrency, small banks have a leg up on their big competitors. And when those small banks take advantage of their size and flexibility they stand to experience exponential growth that they could never achieve in the traditional banking world.
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