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Cryptocurrency Business Evolution: Why Companies Prefer Foreign Private Banking Services to Manage Crypto Assets

Crypto assets definitely have good economic prospects. Investors are considering crypto as an instrument that will help to form a successful financial future. A research carried out by Capgemini, a consulting company, proves that more than 90% of wealthy young people and 70% of investors with a large capital are now actively investing in digital assets. This fact proves that cryptocurrencies are becoming an important part of investment portfolios owned by successful market players.  According to experts, crypto market capitalization will continue its dynamic growth. According to Boston Consulting Group, the volume of operations is expected to grow 4–5-fold by 2030.

Evolution of the cryptocurrency business

The Attitude of Traditional Banks to Cryptocurrencies 

Cryptocurrency is now a part of the financial system. At the same time, operations with digital assets bear certain risks to be taken into account which include:

  • Fluctuations or absence of predictable price changes
  • Absence of international coordination with regard to the use of cryptocurrencies (absolute refusal on the part of China, global encouragement of investments in Switzerland)
  • Complex technological mechanisms of crypto market regulation
  • Absence of a clear tax regime, which results in high risks of fraud (tax transparency standards are in the process of formation). 

Despite all the hardships, traditional banks do not remain indifferent to the changes in financial activity, and they are becoming gradually involved in working with crypto assets. In 2021, Morgan Stanley, a major American bank, became one of the innovators by providing wealthy customers an opportunity to invest in Bitcoin via special funds. BBVA Switzerland bank included not only trade instruments in the list of financial products for individuals but also the services of Bitcoin storage with potential implementation of support for other cryptocurrencies.

Large companies highly evaluated the prospects of strategic partnerships in the sphere of finances related to the trade and storage of crypto assets. The merger of BNY Mellon, an American holding company, with Fireblocks crypto platform may serve as a good illustration of this fact. In addition, a partnership agreement was concluded between Julius Baer, a private Swiss bank, and Seba Bank (AMINA Bank AG after rebranding), a licensed digital asset bank.

In 2022, the Italian Banca Generali bought out a share of Conio cryptocurrency exchange, which gave its customers an opportunity to autonomously trade in Bitcoins right from their current account. Singapore’s DBS bank offers cryptocurrency trade services with access to its own digital asset exchange. 

The examples above confirm the growing interest of traditional banks in cryptocurrency services integration.  

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Specific Nature of the Private Banking Service

Private banking as a private financial service is focused on the demands of wealthy people interested in efficient capital management. Investment in cryptocurrency is considered to be one of the popular options.

The current banking sector transformation evidenced that the cryptocurrency is not only a temporary trend: it is becoming a part of the new investment world reality. As its popularity is on the increase, the question of accredited support on the part of governmental authorities and financial institutions is becoming especially relevant.

Commercial banks with high commissions and service rates have to increase the value of their services to attract and retain customers. The attention to the crypto market has become one of the promising ways to do that. Adding tokens to other financial products makes it possible for banks to expand their business and receive new sources of income.

According to experts, they can potentially work with crypto investors in the following areas:

  • Training customers to carry out operations on the cryptocurrency market
  • Provision of access to simple financial instruments (storage and trade)
  • Access to crypto products

It is easier for banks that provide traditional financial services, such as wire transfers and bank cards, to switch to a new cooperation level and modify operations to meet the customers’ current demands. Carrying out technical transformation makes it possible for them to efficiently convert cryptocurrencies into fiat money for use in everyday financial operations.

In addition, they give crypto investors an opportunity to diversify investments by attracting portfolio or Lombard loans. It creates the possibility for a more stable and balanced investment approach that takes into account both cryptocurrency and traditional assets.

Private Banking: Advantages

Risks and commissions are not something new to crypto investors as these are usually the people who managed to make a substantial capital. Cooperation in the private banking sphere is first of all interesting to them as they can get the level of service inaccessible in ordinary financial institutions:

  1. The customer has quick access to financial support and assistance at a convenient time. Direct contact with a private banker is an important element of trust and comfort in the resolution of current financial problems.
  2. Non-standard requests can also be satisfied. A private banker has a high level of freedom in making transactions that are in line with a different hierarchy of customer requests. Its activity is not limited by any restrictions or job descriptions. If a customer finds himself in a difficult situation, he can agree on decisions with high-ranking officials and directly with the bank’s administration.

Promotion of transactions and compliance with the customers’ high expectations is a way for a private banker to receive more remunerations and bonuses. Private banks do charge high commissions, but this is just a result of their decision and the possibility of satisfying non-standard demands.

Present-day private bankers are often more than just persons who occupy a standard position in a bank. Many of them are former banking specialists who have a high qualification and impressive experience. They conclude contracts that make it possible for them to directly cooperate with the offices of different institutions. In this case, the bank is just an investment and technological platform, and a private banker can choose more flexible hours and have a different remuneration structure.

Private bankers often cooperate with several banks at a time. It helps them analyze and compare offers and find the best conditions for their customers.

Deposit Limits for Transfer Under Management

The approach of private banks to initial deposits of their customers is unique and often depends on particular circumstances. Some institutions are ready to open accounts with a minimum deposit as they expect to receive profits in the future, for example, from successful IPO deals, customers coming into an inheritance, or the appearance of additional sources of income. However, this is not a typical offer, and it is usually an exception.

At the same time, large banks set moderate minimum initial amounts. Standard requirements usually imply depositing at least USD 500,000. Such conditions make banking services quite cost-effective for active crypto investors.

Financial institutions mostly welcome wealthy investors who have various legal sources of income, be it business, investments in real estate, or cryptocurrency operations. The essence of private banking lies in individual transactions where you need not only figures but also attention to the customer’s requests, striving for asset diversification, and mutual benefit.

Cryptocurrency as a Loan Collateral

Some financial institutions offer credits collateralized by such currencies as BTC and ETH that are considered valuable, stable, and reliable crypto assets. However, this approach is not a standard generally accepted practice yet. It makes it possible for investors not only to preserve their long-term savings but also use tokens as a collateral to perform additional financial operations with leverage.

It can be concluded that the evolution of the cryptocurrency business inevitably brings about changes in asset management strategies. Present-day companies and individual investors that operate in this sphere resort to private banking more and more often to efficiently manage their cryptocurrency portfolios. This trend testifies that the industry is looking for reliable and professional solutions to ensure security and capital growth in the dynamic cryptocurrency sphere where the risk level and the asset management complexity are much higher than in traditional financial markets.

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