According to a market intelligence report recently published by Grayscale Investments, more legacy financial institutions in the United States are interested in finding ways to provide access to clients who wish to hold cryptocurrencies such as Bitcoin and Tether. A few years ago, the asset and wealth management divisions at Bank of New York Mellon noticed that their high net worth clients were hopeful that they would be able to acquire digital currencies through the bank instead of exchange platforms, which explains why this institution is now managing crypto assets through established custodians.

Despite the fact that digital assets are not legal tender, and are not backed by any form of governmental guarantee, other financial institutions such as BBVA are continuing to examine the possibility of holding cryptocurrencies in custody for their clients. This is precisely why institutional investors that are willing to hold crypto assets and offer them to their clients have also gained their attention.

The current regulatory framework is not the reason for the underperformance of the digital currency space

The first and most obvious reason for the popularity of digital assets like Bitcoin and Ethereum is that these currencies are not backed by any governmental institution. The second reason is that there are limited regulations pertaining to cryptocurrencies in the United States, which has made them ideal for individuals and businesses who want to bypass third-party middlemen such as stock exchanges or traditional brokers.

Although there have been many arguments surrounding the legality of digital assets, this is not the primary reason for their existence. According to the report published by Grayscale, the current regulatory framework is not the main reason why institutional investors are interested in the sector. It is much more likely that they are looking to offer cryptocurrencies to their institutional clients because they have a large amount of assets that they need to manage. Because crypto assets represent financial instruments, they may pose the same risks as stocks and bonds, which are why institutions are becoming increasingly interested in understanding how to manage these assets. With BNY Mellon and BBVA already providing these services, it will be inevitable that other banks will follow suit in order to stay competitive.