Fitch Forecasts Crypto to Increase Trading & Custodial Fees for Banks
The overpowering FOMO dynamic originating from cryptocurrency circles has the potential to make 2022 a difficult year for Asian banks. Whether it’s fear of losing out or prudent business considerations, numerous institutions are following suit. This is especially true in Southeast Asia, where DBS Bank of Singapore launched a cryptocurrency Digital Exchange platform.
Siam Commercial Bank acquired a 51 percent interest in bitcoin dealer BitKub in Thailand. Union Bank of the Philippines has announced intentions to provide cryptocurrency and custody services and so on. All of this has institutions like Fitch Ratings concerned, as well as investing titans like Goldman Sachs. Not raising the red “danger” signal in light of the fact that money’s trajectory is definitely away from notes, coins, and traditional payment methods. It has a more cautious-with-what-you-wish-for tone.
On the other side, according to Fitch analyst Tamma Febrian, jumping on the cryptocurrency bandwagon might result in an increase in trading and custody fees over time. As fantasy becomes financial reality, banks may develop competitiveness and new client bases in emerging service industries. It seems unlikely that the competitive concerns offered by cryptocurrency and fintech firms in wholesale clearing, settlement, and cross-border payments will lessen.
Nonetheless, hazards exist as cryptocurrency innovation and regulatory reactions accelerate at a rate quicker than corporate suites can adjust. And possibly not quickly enough in the context of market protections and infrastructure.
“Changes might result in increased compliance expenses or a reduction in prevailing/planned business operations, even as stricter regulation aids in management of financial and operational risks, offering more confidence to prospective cryptocurrency investors and users,” Febrian adds.
“Where banks have lax risk mitigation set ups, there is a larger danger that their involvement with cryptocurrency would subject them to legal issues, such as money laundering and terrorist funding.”