Banks may use Bitcoin in various ways, but it is not yet a widely adopted technology in the banking industry. Some banks and financial institutions have begun to explore the use of blockchain technology, which underlies Bitcoin, for purposes such as improving payment systems, reducing fraud, and streamlining back-office operations. However, most banks have been cautious about adopting Bitcoin as a currency due to its volatility, regulatory uncertainty, and operation outside of traditional financial systems. In addition, Bitcoin's decentralized nature and lack of a central authority make it difficult for banks to control or regulate its use.
That being said, some banks and financial institutions have begun to offer Bitcoin-related services, such as custody and trading. These services may be provided through partnerships with third-party cryptocurrency exchanges or other service providers. Some banks are more "Bitcoin-friendly" than others.
One example is the Swiss bank Sygnum, which has been licensed by the Swiss Financial Market Supervisory Authority (FINMA) to provide custody and trading services for cryptocurrencies, including Bitcoin. Another example is the US-based bank Silvergate, which has a significant presence in the cryptocurrency industry and offers banking services to many cryptocurrency-related companies. In addition, there are a number of cryptocurrency-focused banks and financial institutions, such as Kraken Bank, Avanti Bank & Trust, and Anchorage Digital Bank, that offer services specifically tailored to the needs of cryptocurrency users and investors.
It is not common for banks to recommend diversifying a portfolio with Bitcoin or other cryptocurrencies. Banks typically recommend a diversified portfolio that includes a mix of traditional assets, such as stocks, bonds, and mutual funds, in order to manage risk and achieve long-term financial goals. But, for example, in 2021, Morgan Stanley, one of the largest banks in the US, became the first big US bank to offer its wealthy clients access to bitcoin funds. The bank's wealth management division will give its clients access to three bitcoin funds, two from Galaxy Digital and one from NYDIG, according to an internal memo. Morgan Stanley will require investors to have at least $2 million in assets held by the bank to qualify for the bitcoin funds. The move signals a further shift towards the mainstream adoption of cryptocurrencies by institutional investors.
Overall, while the use of Bitcoin by banks is still limited, it is possible that we may see greater adoption of blockchain technology and cryptocurrencies by the banking industry in the future.
If you're wondering about the legality of using Bitcoin, see Is Bitcoin legal?
The article does not contribute financial advice.