Guide to Cryptocurrency Use by Banks in 2021

How are banks using cryptocurrency?

Blockchain technology is already used in several areas within financial services, including international payments. The digital currencies used in these bank-operated cryptocurrency payment systems differ in several ways from most other cryptocurrencies, including Bitcoin. One difference is that most of them are proprietary “stablecoins” that are pegged to national currencies. The goal is to make them less volatile than other cryptocurrencies, many of which have fluctuated widely in value. Experts say that the relative stability of stablecoins opens more possibilities to use cryptocurrencies in everyday payments and as a digital form of cash.

Which banks are using crypto?

1. Silvergate Capital

Silvergate Capital the bank is most famous for the Silvergate Exchange Network (SEN), a digital payments network that can instantly clear transactions in U.S. dollars around the clock, 365 days a year, between two users in the network. This is ideal for institutional crypto traders and crypto exchanges because cryptocurrencies are always trading.

2. BNY Mellon

Bank of New York Mellon, the nation’s oldest bank, said that it will begin financing bitcoin and other digital currencies. The custody bank will eventually allow digital currencies to pass through the same financial network it currently uses for more traditional holdings like U.S. Treasury bonds and equities after months of analysis of its prototype digital asset framework. Pending product analysis and approvals, the bank should begin offering the services to its customers later this year.

3. Signature Bank

The nearly $74 billion asset Signature Bank, based in New York City, has also jumped into the world of cryptocurrency with its Signet digital payments system. Signet leverages blockchain architecture to create a real-time payments system, which, like Silvergate's SEN, also allows commercial clients on the network to instantaneously send and clear payments to one another. The platform has helped the bank bring in $10 billion in deposits. Signature also has the top five crypto exchanges on Signet.

4. JP Morgan Bank

In October, the bank launched its own digital coin, the JPM coin, in order to conduct global payments activity, similar to Signature Bank and Silvergate Capital. JPMorgan also has its own digital currency division called Onyx. In February 2019, J.P. Morgan said it had successfully trialed JPM Coin, a prototype new digital coin, for transferring international payments as cryptocurrency between its corporate customers. The bank said it is also looking at using the technology for other purposes.

Each JPM Coin represents one U.S. dollar held in an account at the bank. When one bank customer sends money to another over the blockchain, JPM Coins are transferred and instantaneously redeemed for the equivalent amount in U.S. dollars, reducing the settlement time. A transaction typically involves a three-step process; first, a business deposits money at the bank and receives the corresponding number of digital coins; second, the coins are used in cryptocurrency payment transactions over a blockchain network with other bank customers; and third, the holders redeem the coins for dollars.

5. Chime Bank

Chime Bank is headquartered in San Francisco, California. The company offers no monthly fees, no overdraft fees and no minimum balance fees. With Chime Bank, you receive your direct deposit payments as soon as they are processed. The official statement from Chime is that bitcoin purchases are not allowed with their VISA debit card, however, you can utilize a platform such as Paxful and use their escrow system to move money to pay friends directly with their username, phone number or email.

6. Wirex

 Wirex is a London based company that allows customers to open a crypto-friendly business account. The Wirex app can be accessed on both iOS and Android devices. Wirex offers the first-ever FCA-licenced, crypto-friendly business account that is secured with multi-signature cold-storage. Within the Wirex app, you can seamlessly buy, store and exchange digital and traditional currencies anytime. Customers can fund their accounts using a debit or credit card, bank transfer or crypto. Wirex can also be linked to a third-party service such as Curve, Revolut, or Paypal. Customers can exchange between currencies at any time.

7. Ally

Ally is an online only bank that allows customers to link their bank account to Coinbase and buy desired coins with debit cards.  

8. Mizuho Bank

In Japan, Mizuho Bank in February 2019 launched J-Coin Pay, a mobile payments platform based on a digital currency, in cooperation with about 60 other regional domestic banks. The system does not use cryptocurrency or blockchain technology. Consumers and businesses that are customers of the banks will be able to make payments using a smartphone app and QR codes. The J-Coin will be pegged to the Yen, and the banks will promote use in part by charging merchants lower fees than for credit card payments.