Banks are becoming bitcoin banks whether they like it or not

For the past decade or more, all I’ve heard bankers say about bitcoin is that it’s a scam — a Ponzi scheme — purely useful for money launderers, paedophiles and terrorists. So, why are banks now offering bitcoin services? The answer is obvious: because customers want them.

During the first half of the year, almost all major banks made public announcements about offering custodial services, trading services, transaction services and more related to bitcoin, ethereum and other cryptocurrencies. Yet, when talking to these banks, they tell me they still hate the idea of cryptocurrencies and still believe they are not for the public good. However, when one bank announces a cryptocurrency service, the others have to follow the market trend.

This is an interesting space. Providing cryptocurrency services, but not believing in their viability, is a fine line to tread.

What this typifies is the friction between analogue and digital, industrial and networked. The old world does not recognise the new world, and vice versa. The new world believes in bitcoin; the old world does not. The new world is trying to create a new financial system; the old world is trying to protect the historic financial system. The new world is born on the internet; the old world was born on the railroads.

Talking about a revolution

This friction is clear to me in so many areas. It is almost like that scene from Victor Hugo’s Les Misérables when the rebels are putting up the barricades and the government is trying to knock them down. In the book and musical, the rebels lose; in reality, they won — King Louis XVI was executed and the government fell.

This moment in time feels like a similar shift. The shift between old-world structures and new-world ideas. These themes were brought to a head by Elon Musk and his tweets about dogecoin as a ‘joke’ currency. These themes were brought to a head by memes related to GameStop and BlackBerry that saw their share prices boom on the back of a stock that had little value.

When I ask people about what’s going on, the answer invariably comes back that young people do not believe in the old system and are rallying against it. They are pawning the short sellers by attacking the stocks they short. Young people are making millions on the back of currencies they don’t understand. They are bucking the system.

As a bank, this is a tough time. Do we support assets that we don’t believe have any value? Do we move into markets where we see no regulations? Do we operate under government guidance or market movements? Do we do whatever we have to do?

In my view, banks are doing just this. While they have chief executives who regularly spit on bitcoin, their trading desks and investment services offer to trade and invest the currency for you. While they believe in blockchain and distributed ledger technologies, they will manage whatever digital assets their customers want them to. While they resist digital transformation, they invest in doing digital work.

It’s a tough time, but it’s got to be done. The inevitable march of progress is forcing banks to change, whether they like it or not; and they are changing, whether they like it or not. It’s just very difficult to change and work with things you fundamentally do not believe in. That said, if the customer believes in it, then banks must believe as well.

Chris Skinner is an independent financial commentator and chairman of the London-based Financial Services Club.