For the majority of US banks, a cryptocurrency business or venture is something they prefer to avoid as clients. However, for the Metropolitan Commercial Bank, individuals and entities in this domain are pioneers. This is how Nick Rosenberg, the financial institution’s CTO, describes them.
According to him, the bank is very interested in growing this particular vertical. They realized they come from a very serious industry and that it has some very smart people on board. This is why the field is generating many interesting ideas and some of them stand a solid chance of changing the way the world does business.
A lot of banks are ready to declare that they are interested in the blockchain, but not bitcoin or any other digital currency. Metropolitan is one of those who stands out as a company that is ready to enthusiastically accept deposits from firms working in crypto.
Their client currently includes a couple of digital currency exchanges, crypto investors and hedge funds which find the bank’s offer as something that helps their business. Of course, the bank itself only handles money transactions of these businesses, not the actual crypto asset. All of the bank’s dealings are still in fiat currencies.
A Worthy Venture
So far, this niche has been more than lucrative for the bank. In Q1, their fees from crypto clients, mostly cash management services and also foreign exchange conversion profits ended up at $3.4 million, the bank’s official stated recently. This has boosted the bank’s profits substantially on a year-to-year basis, more precisely by 300 percent.
This might not sound like a huge amount, but Metropolitan is a community bank. It holds just slightly below $2 billion in total assets. This makes it a one-1,000th the capital size of JPMorgan, for example. But, it now has a growth rate that is measured in triple-digits, which is incredible for the US banking industry or any industry for that matter. During the same period, others in the same field managed to scrape out 7.9 percent growth in the same period.
Clearly, the decision to stick with crypto customers proved to be a smart move on the part of the bank. The same thing is even more impressive when the recent pressures on banks and other financial services working with crypto ventures are taken into consideration.
The Issue of Federal Deposit Insurance
The crypto field is in constant demand of banks that would provide them with fiat liquidity, as well as other traditional financial products. Yet, even though there is obviously a lot of money to be made, banks like Metropolitan continue to be a rare occurrence.
In fact, their numbers are apparently on the same level as they were three years ago. The Federal Deposit Insurance is an issue for many banks as they are not quite sure how to define cryptocurrencies and the companies working with them. This lack of regulation is an endemic problem in the crypto field and banks which want to deal with them are also in the dark about possible repercussions from federal regulators.
That is why some analysts point out that in the US, the legalized cannabis industry, which is also facing a myriad of federal vs. state problems, is actually ahead of crypto. Businesses in this industry, in spite of their trials and tribulations, are still having an easier time than all cryptocurrency clients of the traditional banks.
Ready for Risks
One of the key reasons why the Metropolitan Bank is willing to embrace the crypto industry is its acceptance of inherent risks that come with the market. The main concern among these is, as it was already stated, the risk of sudden and sweeping regulation.
The current anti-money laundering regulations ask that banks identify not just their clients, but also the customers of their clients. This should take place along with tracking of their funds and where they are moved. But, the often anonymous nature of the crypto addresses and accounts makes it difficult to figure out who is sending or receiving funds.
At the same time, the persistent notion that bitcoin is connected to underground markets is not helpful either. The Metropolitan bank representative stated that keeping a pro-bitcoin stance is not easy. Also, the fact that compliance officers shift so regularly also makes the bank’s efforts an uphill battle.
But, Metropolitan bank might be bullish, but it is not blind to the risks. At the same time, they try to follow the two concepts that are needed to successfully serve crypto clients. The first is being selective when it comes to client acquisitions and the second is to always have an open dialogue with the regulators. This way, both the bank and the clients can be assured that they have their bases covered as much as possible.
Reaping the Rewards
Metropolitan is naturally in the crypto game because of the profits. However, aside from the regular fees the bank has access to, it also has a substantially bigger benefit. It is in the front seat for the ongoing revolution of cryptocurrency adoption and the lessons it is learning now will become incredibly valuable down the road.
With the understanding of technology and the way it connects with the traditional banking structures, the bank is able to ready itself for the changes that will unquestionably come. This is something its competitors, both on-scale, and much larger, simply do not have.
Thanks to this mentality, the bank is already looking at things like security tokens, as well as settlement systems that work using the blockchain principle.
The opportunity to merge technologies like this with an actual bank and its ready-to-go services could be a game-changer in the near future for the Metropolitan. Even with the crash-and-burn scenarios that might come with individual crypto ventures, this knowledge-gathering process is priceless.
As with many other digital ventures, like eSports, for example, the individual elements could be flawed, but the whole trend is clearly going places. The same is completely true for digital currencies. By being a bank that does not shy away from this fact, the Metropolitan is setting the foundations for its upcoming success.