Top banks that are investing in crypto coin and blockchain firms
In August 2021, either directly or through subsidiaries, 55% of the top 100 banks by assets under management (AUM) made investments in businesses engaged in the blockchain and/or virtual currency industries. We decided to review the activity of the banks we tracked and see what they have been investing in since the crypto blockchain market has seen high levels of volatility. In the cycle from August 2021 to May 2022, about 23 banks made at least one investment in a blockchain- and cryptocurrency-related firms. When these transactions were located, six of them were new investors with trades that they were making for the first time in the ecosystem, while the remaining transactions involved returning investors including Morgan Stanley, BNY Mellon, and Goldman Sachs.
Since August 2021, custody solutions and technology providers have raised some of the largest funding rounds, as might be expected, maintaining their popularity among the top banks. NYDIG ($1B), Fireblocks ($550M), Gemini ($400M), and Anchorage Digital ($350M) are a few of the acquisitions mentioned here. This was expected because demand for and the number of digital assets kept by custody providers increased as a result of the market cap value of cryptocurrencies reaching an all-time high in November 2021. Assets under custody (AuC) has increased by an astonishing 600% since the start of 2019. Banks contributed to mega-rounds ($100M and up) raised by custody and technology solution providers, which included, Commonwealth Bank of Australia participating in Gemini’s $400 million Series A round, and Morgan Stanley made a follow-on investment. BNY Mellon made a follow-on investment in Fireblock’s $550 million Series E round. GS Growth invested in Anchorage Digital’s $350 million Series C financing.
Wells Fargo Strategic Capital, BNY Mellon, and Citi Ventures have shown interest in Talos, another up-and-coming provider of digital asset and cryptocurrency trading infrastructure. Talos’ aspirations to extend support beyond centralized cryptocurrency trading to decentralized finance (DeFi) systems have made it particularly well-liked among banks. Another blockchain infrastructure firm, Blockdaemon, has obtained numerous rounds of funding from Citi Ventures, who participated in their Series C round, as well as J.P. Morgan Chase and Goldman Sachs, who invested in their Series B round. Blockdaemon focuses on node management and staking. Their involvement and investment in this market demonstrate their commitment to the ongoing creation of the blockchain infrastructure tools and services required to sustain the expanding cryptocurrency ecosystem.
In general, banks are making investments across a range of sectors, from marketplaces and platforms for blockchain development to services for market data and decentralized apps. The majority of these investments aim to quickly increase consumer reach, user adoption, technological innovation, and customer experience shortly. To carefully manage the constantly changing dangers and take advantage of new opportunities, banks are also investing in companies that provide information and insights on blockchain and cryptocurrencies. For instance, Amberdata (with Citigroup as a participating investor) provides data and insights related to blockchain networks, DeFi, and crypto, while Coin Metrics (with the support of Goldman Sachs and BNY Mellon) offers market intelligence, network data, indexes, and network risk solutions related to cryptocurrencies.
According to Brian Moynihan, CEO of Bank of America (BoA), some banks are taking a proactive approach by investing in cryptocurrency businesses, while others are adopting a wait-and-see approach because current regulations forbid them from doing so. This was revealed in a recent interview at the World Economic Forum in Davos. Yet, that hasn’t stopped them from establishing a cryptocurrency research section to serve institutional clients as well as retail customers and create intellectual property for the technology. Blockchain-related patents accounted for 8% of all BoA-granted patents as of 2021, representing an 86% increase for the bank in this key patent category.