Traditional Banks Fuel Crypto Surge with Major Investments

Traditional banks have injected over $100 billion into the cryptocurrency and blockchain landscape since 2020. This substantial investment, highlighted in the “Banking on Digital Assets” report by Ripple, CB Insights, and the UK Blockchain Technologies Centre, analyzed more than 10,000 investment deals. The research surveyed over 1,800 finance executives globally. While the sector still faces regulatory and market challenges, efforts to develop services such as custody, tokenization, and payment systems are gaining traction. Traditional banks are transitioning from speculative activities in cryptocurrencies to reinforcing their infrastructure frameworks.

How are Cross-Border Payments Affected?

The report illustrates that traditional financial entities have engaged in 345 blockchain-related deals from 2020 to 2024. A significant portion, nearly 25%, of these investments targets infrastructure companies behind blockchain settlement and asset issuance platforms, with cross-border payments taking precedence. Alongside, crypto custody solutions, tokenization, and blockchain-based foreign exchanges also draw attention. Moreover, 65% of banking executives delve into custody services, while more than half prioritize stablecoins and tokenized real-world assets.

Do Regulatory Hurdles Impede Progress?

Despite regulatory hurdles in the US and Europe, the momentum for adopting blockchain technology hasn’t waned. After the FTX exchange’s downfall in early 2024, there was a notable surge in blockchain investments, particularly from traditional finance sectors. Emerging markets, including the UAE, India, and Singapore, have rapidly embraced the technology, consequently aligning global capital more toward these advancements.

Highlighted examples from the report include HSBC’s tokenized gold offering, Goldman Sachs’ GS DAP initiative, and SBI’s quantum-resistant currency project. Yet, fewer than 20% of banks provide options for trading cryptocurrencies or personal digital wallets.

Organizations intend to leverage blockchain to enhance balance sheet management, boost liquidity, and phase out legacy messaging infrastructures. Survey results reveal that 90% of finance leaders expect cryptocurrencies to wield “significant” or “very large” influence over the financial sector by 2028. Notably, half of these entities foresee the initiation of tokenized bond pilots or establishing settlement layers for central bank digital currencies (CBDCs) and private stablecoins in the upcoming three years.

Key insights from the report include:

• Financial entities directed 25% of blockchain investments to settlement and asset issuance infrastructures.
• Nearly two-thirds of executives are exploring custody solutions.
• Over 50% emphasize the importance of stablecoins and tokenized assets.
• Post-FTX, there was a spike in traditional finance-led blockchain investments.

Ripple’s report underlines the move toward tokenizing real-world assets, now poised for execution. This evolution showcases the resilience and forward momentum in the financial sector, underscoring traditional banks’ pivotal role in fostering blockchain and crypto adoption globally.