How financial institutions are becoming active players of the Crypto ecosystem
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Since 2009, the year marking the creation of the Bitcoin network, the cryptocurrency market capitalization has drastically increased, reaching a high of $3 trillion as of November 8th, 2021, and is now at 1,8 trillion as of February 2022.
Business cases for the use of digital assets and cryptocurrencies have multiplied such that financial institutions can no longer remain indifferent to the growing role and importance of cryptocurrencies and digital assets. Since the beginning of the COVID-19 pandemic, and particularly over the past 10 months, trends that were set in motion over ten years ago have certainly gained momentum, particularly those that pertain to monetary and financial applications.
Since 2020, a total of seven Central Bank Digital Currencies (CBDC) were launched and 87 countries (representing over 90% of global GDP) are now exploring CBDC opportunities. Meanwhile, news of CBDC project announcements by developed economies continue to surface in the media, the Bank of France being one of the most recent ones as of the date of this paper.
Financial institutions in the United States have been formalizing their recognition that cryptocurrency and digital assets are inevitably part of the new digital economy by creating dedicated desks, boosting their offering to certain client segments and the launch of bitcoin Futures ETF in October 2021.
While Canada was considered amongst the early movers in this field with the Jasper Project, and the launch of the first bitcoin ETF, Canadian financial institutions have thus far taken a more conservative approach, with very limited-service offerings, while internal expertise is being brought in to carefully evaluate the cryptocurrency and digital assets space and formulate a strategy to position themselves in this market when the right time comes.
Regardless, as we explore in this whitepaper, non-traditional players across the globe largely service clients in cryptocurrencies and digital assets, adding to the growing pressure for traditional financial institutions to deploy their strategy now. Amidst and because of the regulatory uncertainty surrounding cryptocurrency and digital assets, financial institutions in Canada should embrace cryptocurrencies and digital assets and move beyond the observation / study mode into the active participation mode to help build and be part of tomorrow’s ecosystem.
This whitepaper reviews some of the key market trends and developments in the cryptocurrency and digital assets ecosystem, globally and in the US and Canada and explores some of the reasons why and how financial institutions can strategically embrace cryptocurrency and digital assets today.
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