In their constant search for new products and services that generate revenue and give customers more options, banks have found cryptocurrency technology as one of the most promising answers to these demands.
In the study titled “Demystifying the Adoption and Implementation of Crypto and Digital Assets, and the Risks for Banks,” specialists from Capco, a global management and financial technology consultancy that is part of the Wipro Group, analyze the scenario of the implementation of cryptocurrency. assets by financial institutions and present ways to simplify this process.
One of the points raised by the research is that traditional banks generally view actions related to cryptoassets as a conventional change project, attempting to calculate returns and benefits.
However, due to the highly dynamic and ever-evolving nature of this industry, implementation requires a significant focus on coordination across multiple areas, with particular emphasis on business and technology aspects to define viable use cases.
Crypto-assets have sparkled in the eyes of a growing number of investors in recent years, but they have experienced crises that call for greater caution, both for those who use these products and for those who make them.
The so-called “crypto winter” started in late 2021 with the fall in cryptocurrency prices, after months of consecutive highs.
Throughout 2022, this decline contributed to collapses such as that of the stablecoin Terra USD (cryptocurrency that would have a ballast to maintain a value similar to that of the dollar), followed by the implosion of the NFT market, non- fungible tokens, the fund liquidation of Singapore-based crypto hedging Three Arrows Capital, and the bankruptcy of companies such as Celsius, BlockFi, and FTX, the latter the world’s second-largest crypto exchange to date. At the same time, there were rounds of job cuts.
Banks are analyzing opportunities with cryptocurrencies, says Capco manager
But these events, as well as previous financial crises from companies in the traditional world such as Enron and Lehman Brothers, revealed important lessons about the need to drive improvements in processes and financial stability.
According to Alexandre Bueno, senior manager at Capco and head of Capco Digital Lab São Paulo, there is a clear opportunity that banks are already analyzing.
“Looking forward, we see a clear opportunity for regulated banks to take ownership and leadership in this space, leveraging their value chains, scale, regulated operations, trusted status and strong governance. This market is growing fast and innovating all the time, but the cryptocurrency and digital asset projects of traditional financial institutions will only take off if there is an understanding of the risks inherent in these products.”
According to the executive, traditional banks will need to leverage their crypto asset portfolios based on sound risk management and personalized services to meet customer needs. But at the same time keep the focus on your strategic roadmap.
“The growing fintech B2B ecosystem is the key gateway to facilitating the banking industry’s ambitions to seize the opportunities of cryptocurrencies and digital assets.”
According to Bueno, the ecosystem participants are well positioned to support banks in this transformation and in implementing solutions to capture a significant share of the market.
On the other hand, banks should be aware that the entry into force of regulations, such as Law 14.478/22, approved by the Brazilian Congress late last year and due to come into force in June, should increase competition in the segment. The law deals with the regulation of companies that provide services related to crypto assets. Detailed rules should be released in the coming months.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
