It was just a matter of time before banks bow to the ever-increasing pressure from Cryptos.
In a new report to the Securities Exchange Commission (the SEC, according to Wiki, is an independent agency of the United States federal government that holds primary responsibility for enforcing federal securities laws, proposing securities rules, and regulating the securities industry, the nation’s stock and options exchanges, and other activities and organizations, including the electronic securities markets) Bank of America (BOA) has cited Cryptocurrency as a significant risk to its business.
BOA states that the technology could hamper its ability to comply with anti-money-laundering regulations and pose a competitive threat; forcing the company to spend more money to keep up with the times.
By mentioning “Cryptocurrency” three times in the risk factors section of the annual report to the regulator, BOA, the second largest bank in America acknowledges the threat that the digital currency poses to banks globally.
Complying with AML and KYC
In the discussion on AML (Anti Money Laundering), KYC (Know-Your-Customer), Sanctions and Foreign corruption laws in the U.S, the Bank states “Emerging technologies, such as Cryptocurrencies, could limit our ability to track the movement of funds,” further explaining that the banks ability to comply with these laws is dependent on its ability to improve detection and reporting and reduce variation in control processes and oversight accountability.
By raising points on AML and KYC, the bank more or less is passing the buck back to the regulator, kind of nudging the regulator to do something to ensure compliance. If more mainstream money players such as Banka, money transfers etc. express similar sentiments and the regulator bows, we might see increasing surveillance and curtailing of the activities of Crypto players.
In a passage directly acknowledging the threat of Crypto to its business model, the bank notes that:
“Clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as Cryptocurrencies”.
Cryptos and indeed the blockchain are revered for their anonymity, speed and low transaction costs which could lure clients onto these new platforms. As it is now, BOA does not support crypto, hence the disadvantage.
In the third mention, BOA states that rising adoption of cryptos would result in it having to dedicate more resources to stay competitive.
“[T]he widespread adoption of new technologies, including internet services, Cryptocurrencies and payment systems, could require substantial expenditures to modify or adapt our existing products and services,” the bank said”.
Bank of America and other numerous U.S. banks recently banned credit card purchases of Cryptocurrency, however, the bank did not restrict crypto purchases using debit cards. BOA is known to be a prolific filer of patent applications for block-chain technology concepts, hence a clear indication that it is preparing silently for the Crypto take off.
In Kenya, the Central Bank of Kenya, who is the regulator of Banks has cautioned against involvement in Cryptocurrency. There are no publicly acknowledged Banks that deal with Crypto. This threat acknowledged by BOA directly affects Kenyan banks who better be prepared than sorry later.