All the pieces are in place for banks to start offering cryptocurrency services, Anchorage CEO Nathan McCauley said at the Digital Banking Conference on Monday.
The company, which obtained a national trust bank charter from the Office of the Comptroller of the Currency in 2021, provides crypto custody, trading and collateralization services to financial services firms including hedge funds, sovereign wealth funds, institutional investors and public companies adding bitcoin to their balance sheet. One client, Cantor Fitzgerald, lends to clients against their digital asset holdings.
The current market cap for digital assets is $3 trillion, McCauley said.
"If you look at it in terms of GDP, it's roughly equivalent to some countries like the U.K., France or India," he said.
"Fifty-five million Americans own some form of digital assets, be it bitcoin, be it stablecoins, be it their favorite altcoin," McCauley said. "This is a huge phenomenon. That's about 25% of the adults within the country holding digital assets in some form. Where are they holding it? And I would guess that the answer is, 'Not at your institution.'"
There are now 13 bitcoin ETFs, he said. The U.S. government, New Hampshire and Arizona are establishing bitcoin strategic reserves.
"We've got nothing less than full embrace of bitcoin across the ecosystem," McCauley said.
One of the most interesting ways banks can get involved is by lending against bitcoin, he said.
"Many of you probably lend against real estate, a relatively illiquid asset," McCauley said. "Why not lend against the most liquid asset in the world that has 24/7 markets and allows many of your clients to borrow against their assets?"
The volatility of cryptocurrencies can be accounted for by overcollateralizing, he said.
There are many questions around how to do this, particularly with respect to meeting anti-money-laundering compliance requirements, integrating crypto into existing systems and making everything work together, he acknowledged.
Stablecoins present another opportunity to banks, he said.
"It is an official policy of the current administration to advance the dollar and to do it via stablecoins, McCauley said.
Banks can issue their own stablecoins. They could allow clients to deposit stablecoins. This will require new infrastructure and integration with core banking providers.
Cryptocurrency technology can help with transaction settlement, he said.
"Crypto is 24/7, we settle the same day every day, 24/7 and it's kind of funny that banking turns off at four o'clock every day," McCauley said. "It's funny that banking turns off on the weekends. And I wonder if we will view that as a relic of the past."
"There has never been a better time to get into digital assets," McCauley said. "There's never been a better time to make the bold moves. Everything has come together. We have the administration, we have the [Securities and Exchange Commission], the [Federal Reserve], the [Federal Deposit Insurance Corp.] the [Office of the Comptroller of the Currency], —everybody saying green light, go for it. There has never been a confluence of this much positivity for this industry, and now is the time to make the bold moves."
