
CEOs of major American banking institutions are heading to Washington to face legislators' questions about how they will aid a post-pandemic economic recovery.
Major Wall Street bank executives will appear before the United States Senate Banking Committee on Wednesday to discuss the role of their financial institutions in the recovery of the American economy.
Democratic lawmakers plan to grill a number of major bank execs, whose firms saw record profits during the COVID-19 pandemic while average Americans struggled to make ends meet.
In prepared testimonies posted on Tuesday, CEOs at the Bank of America, Citigroup and Wells Fargo described their respective banks' responses to major challenges such as inequality, diversity, climate change, taxes, as well as how their banks handle cryptocurrencies.
This year saw a record bull run in cryptocurrency markets as major financial institutions opened up to digital assets, adding trading desks and custody wings to handle client interests in major cryptos like Bitcoin (BTC).
In his testimony, Bank of America CEO Brian Moynihan said that the bank is continuing to evaluate the benefits, risks and client demand for crypto-related products and services. “Currently, we do not lend against cryptocurrencies and do not bank companies whose primary business is cryptocurrency or the facilitation of cryptocurrency trading and investment,” he said.
Moynihan said that BofA is also assessing new technologies like distributed ledger technology, which could potentially deliver value to the bank's customers. However, while BofA holds over 60 blockchain patents, the bank still has “not found a use case at scale,” Moynihan said.
Similarly, Citigroup CEO Jane Fraser also outlined a measured approach to crypto, stating that the bank will need to ensure clear controls and governance before engaging with cryptocurrencies. “Citi is focusing resources and efforts to understand changes in the digital asset space and the use of distributed ledger technology, including demand and interest by our clients, regulatory developments and technology advancements,” Fraser wrote.
Wells Fargo CEO and president Charles Scharf said that the company has been closely following developments around cryptocurrencies. Digital assets “have emerged as alternative investment products though their status as a currency and mechanism of payment remains fluid,” Scharf noted. The exec also mentioned that Wells Fargo is preparing to roll out a pilot for a blockchain-based settlement service within the bank’s global branch network.
The Senate Banking and House Financial Services committees will also hear from the CEOs of JPMorgan, Goldman Sachs, and Morgan Stanley. The latter two introduced limited crypto services earlier this year, while the former is reportedly mulling opening a crypto trading desk.
Bank of America noted that trades identified as "crowded" have historically been associated with incoming market tops.
Despite the ongoing sideways trend in the cryptocurrency markets, Bitcoin (BTC) still remains a crowded trade. According to a new survey from Bank of America, this could indicate that the current bull cycle's market top is still to come.
Bank of America's most recent fund manager poll suggests that the “long Bitcoin” bet is now the most crowded trade across all markets, with nearly 45% of respondents indicating it ahead of other trades like “long tech,” Bloomberg reported Tuesday. The new BofA survey captured responses from 194 fund managers with $592 billion worth of assets under management.
In the survey remarks, BofA notes that trades identified as crowded have historically heralded an incoming top for their respective markets. Indeed, Bitcoin was trading just around $36,000 when BofA’s survey identified long Bitcoin as the most crowded trade in January. Bitcoin's price subsequently surged to break new all-time highs above $50,000 in February, eventually rising above $64,000 in mid-April.
Long Bitcoin was also chosen as the most crowded trade in Bank of America Merrill Lynch’s global fund manager survey back in September 2017. At the time, Bitcoin traded at around $4,000 before breaking $20,000 in December 2017 for the first time in history.
The latest BofA survey may add some optimism to cryptocurrency markets, which are currently experiencing mixed signals after a major market pullback. The ecosystem shed hundreds of billions of dollars after Tesla CEO Elon Musk announced the suspension of BTC payments for car purchases due to environmental concerns. He also hinted at dumping BTC from Tesla's balance sheet in the second quarter of 2021. However, some crypto players like CoinShares chief strategy officer Meltem Demirors believe that the latest BTC price action should be attributed to other reasons, such as tax-day selling.
In another survey in mid-April, BofA reported that 75% of professional investors see Bitcoin as a bubble. Some crypto activists suggested on Twitter that the majority of BofA fund managers do not trade Bitcoin.
The BofA survey of fund managers, 99% of whom can't trade bitcoin, think "long bitcoin" is the most crowded trade. The last time they did so was in January. It doubled 3 months later.
— zerohedge (@zerohedge) May 18, 2021
Joining the Paxos Settlement Service could allow many Bank of America customers to settle stock trades in minutes rather than days.
The second-largest bank in the United States is now reportedly using blockchain technology for settling stock trades.
According to a Bloomberg report on Monday, Bank of America has joined Paxos Settlement Service, a platform capable of same-day settlement of stock trades using blockchain technology. Kevin McCarthy, head of financing and clearing, said the bank “has been conducting internal transactions for the past few months” and would offer the service to Bank of America clients upon approval as a clearing agency.
The move would reportedly allow for a “more flexible and speedier” stock settlement system compared with that of the Depository Trust & Clearing Corporation, or DTCC, in which Bank of America is a direct participant. The DTCC settlement time is roughly two days, whereas Paxos’ service is capable of settling some stock trades in minutes.
“We can determine the settlement cycle down to T+0,” said McCarthy. “We then can free up the collateral we’d have to post on an overnight basis. [...] The return-on-assets in this business would improve, which has been a challenge.”
Paxos officially launched its settlement service for equity trades in 2019 after receiving no-action relief from the U.S. Securities and Exchange Commission. Credit Suisse, a Zurich-based financial institution, and Instinet, the trading arm of Nomura Holdings, both participated in the pilot, settling U.S.-listed stock trades on the same day.
The stablecoin operator announced in April that it had applied for a clearing agency license with the SEC. Paxos also recently completed a $300-million funding round, which brought its valuation to $2.4 billion.
Bank of America asked 200 professional investors with $533 billion in assets under management about their opinions on Bitcoin.
Bank of America released a new survey that found that the majority of professional investors are not very optimistic about the world’s largest cryptocurrency.
Nearly 75% of respondents in the April BofA Fund Manager Survey said that they see Bitcoin as a “bubble,” CNBC reported.
The survey polled 200 respondents with $533 billion in assets under management. Just 16% of respondents said Bitcoin is not a bubble, while 10% were uncertain.
More than 30% of survey respondents cited tech as the most crowded trade i.e. an asset with a history of rapid price appreciation and a high number of like-minded, speculative investors. 27% of respondents said that Bitcoin is the most crowded trade right now, while 10% predicted that BTC will outperform tech in 2021.
BofA previously released a survey showing that “long Bitcoin” flipped “long tech” as the most crowded trade in January 2021.
The latest BofA survey shows significant skepticism regarding Bitcoin after the bank’s analysts recently slammed the cryptocurrency as “exceptionally volatile”, “impractical” and an environmentally disastrous asset.
Other major American banks are more bullish on digital assets. After Goldman Sachs revealed that 40% of its clients already had exposure to crypto as of March 2021, the investment bank announced it was preparing a Bitcoin product. Also in March, JPMorgan announced its Cryptocurrency Exposure Basket, a debt instrument portfolio including stocks of companies that hold Bitcoin as a treasury asset.