As a seasoned researcher with years of immersion in the dynamic world of finance, I find the growing interest of TradFi institutions in Bitcoin intriguing and promising. My personal journey in this field has allowed me to witness firsthand the evolution of financial landscapes, and the embrace of Bitcoin by these traditional players is no less than a revolution.
Howard Lutnick, CEO of Cantor Fitzgerald, recently shed light on the growing interest among traditional financial (TradFi) institutions in Bitcoin as a new asset class. However, he emphasized that regulatory barriers are preventing these companies from fully embracing Bitcoin.
On X’s post, Lutnick characterized Bitcoin as an “outsider” in the traditional financial world (TradFi), pointing out that it has just started to assimilate within the larger international monetary system
The significant drive for Bitcoin within Traditional Finance (TradFi) stemmed from the Securities and Exchange Commission’s (SEC) approval of Spot Bitcoin ETFs in January. As per SEC 13F filings, by August 30, traditional financial institutions had invested approximately $11.7 billion in these Spot Bitcoin ETFs
According to data from SoSo Value, these ETFs have accumulated $17.31 billion in investments since they were launched at the start of this year. Lutnick suggests that these funds are merely beginning to gain popularity among a wider audience, hinting at significant expansion prospects for the future
“Currently, banks are unable to handle Bitcoin spot ETFs, process transactions related to it, act as custodians for it, or provide financing for it. However, there is a desire among them to be able to trade it and have a new investment class.”
Significantly, current regulations compel banks to maintain an equivalent value of their own funds when they possess Bitcoin, a comparison Lutnick made to keeping that money “imprisoned.” This rigorous condition deters traditional financial institutions from holding Bitcoin, despite the increasing popularity of cryptocurrency. The CEO of Cantor Fitzgerald elaborates on this:
“In a favorable regulatory climate, it’s likely that conventional financial service providers such as banks and brokerages would transition towards adopting Bitcoin.”
Additionally, Lutnick disclosed details about Cantor Fitzgerald’s intentions to broaden its involvement in the Bitcoin market. The company, which currently holds a substantial amount of Bitcoin, is preparing to initiate a Bitcoin lending business with an initial capital of $2 billion. In collaboration with chosen Bitcoin custodians, they aim to kickstart this venture, offering Bitcoin holders borrowing opportunities
TradFi’s Bitcoin Adoption
Beyond Cantor Fitzgerald, several established financial institutions such as JPMorgan, Visa, Mastercard, and many U.S. asset management firms have ventured into Bitcoin and the digital assets market in various forms. Moreover, Bank of America, along with other key players in the banking sector, offer substantial Bitcoin-related services
In June, Visa partnered with Transak for users to start withdrawing Bitcoin and other cryptocurrencies. Additionally, they launched a crypto-to-fiat service that offers Bitcoin cashbacks. Similarly, Mastercard has been developing services related to digital assets and recently collaborated with JPMorgan and Citi in a trial using distributed ledger technology (DLT)
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2024-09-04 18:19