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Cryptocurrency at the Bank Is a Necessary Compromise

4 mins
Updated by Leila Stein
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In Brief

  • As the acceptance of cryptocurrencies grows, banks are responding by expanding their offerings.
  • New technology developing and finding its way into the financial world.
  • Banks must change and adapt to different conditions otherwise they may face obsoletion.
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When people think of investing in cryptocurrencies, the bank isn’t typically their first thought. However, it’s worth taking a look at your local bank or online broker. As the acceptance of cryptocurrencies grows, providers are responding by expanding their offerings. 

Banks are where people open savings accounts, take out home loans, or invest in the stock market. So far, they haven’t been where people turn to invest in one of the most controversial, disruptive, unregulated, and volatile assets ever seen in the financial market. 

So as blockchain makes its way down the value chain of many industries, new disruptive technology is under development.

Non-fungible tokens (NFTs), decentralized finance (DeFi), and GameFi provide new use cases for the underlying technology. In addition, adoption is on the rise.

The crypto market seems to have matured quite a bit. This is especially true since 2020 which saw new market players take to the dance floor.

Banks face rising demand

In the second half of 2020, the crypto industry saw a sharp increase in demand. This was primarily driven by retail investors.

As a result, more and more customers are asking their bankers and financial advisors about ways to invest in cryptocurrencies and, by extension, the underlying projects.

Of course, traditional banks aren’t against innovation per see, for the time being. In fact, many banks are already in the midst of the upheaval caused by increasing digitalization.

Now they must change and adapt to different conditions otherwise they may face obsoletion. 

As a product manager of investing, I know the process of product development up to the live launch all too well.

Satisfying the customer’s needs is the highest priority. If the customer would like to buy cryptocurrencies, it is the task of the product management to fulfill this wish as best as possible. 

However, it’s necessary to take into account other interests that customers sometimes ignore or rely on the bank to consider. Namely, investor protection and acting within the framework of applicable regulations. The creation of new financial solutions is therefore sometimes a lengthy and complex process. 

Finding a compromise between the bank and crypto

The number of banks and online brokers that enable their customers to trade cryptocurrencies directly is steadily increasing. However, it is still relatively small. Here, the lack of regulations and the high technical effort still seems to be hurdles that are too high.

Accordingly, the larger part of the banking world seems to have found another compromise for itself. So-called exchange-traded products are currently often the link between the crypto world and traditional banking.

Banks already trade extensively in exchange-traded products (ETPs). Popular examples include exchange-traded funds (ETFs), exchange-traded commodities (ETCs), and exchange-traded notes (ETNs).

The ETF usually tracks a passively managed index and prescribes a broad diversification of the securities contained in the index. Meanwhile, the ETC is often subject only to a single underlying asset or a selection of a few, often called a basket.

As the name suggests, the history of the ETC is based on the securitization of commodities and precious metals, such as gold or silver. ETCs thus provide ideal frameworks for the mapping and securitization of the new digital assets, cryptocurrencies.

Risk of confusion

At this point, I would like to point out a major difference in risk between ETF and ETC in Europe. In Europe, the ETF belongs to the special assets, meaning that the investment sums are detached from the issuer’s assets and are not subject to any insolvency risks.

An ETC is a bearer debenture (certificate) and thus initially basically has an issuer risk delivered. Many ETP providers counteract this disadvantage of the certificate structure, e.g. by physically depositing the assets and keeping them with a trustee.

These regulations vary from provider to provider and sometimes also depend on the product. Therefore, it is important to weigh or check this risk beforehand.

Bank offers and providers on an expansion course

The supply of crypto ETPs picked up noticeably in the last few years, especially in 2021.

While the first ETPs on major reserve currencies such as bitcoin and ethereum were initially launched by providers such as 21Shares, Coinshares, or VanEck, there are now additional providers and more cryptocurrencies to purchase on international exchanges.

In the meantime, one can invest in more than 20 cryptocurrencies and crypto baskets via ETP and, presumably, it will now not be long before the offer doubles again. 

The banking world is now making much more active use of the increased offering in communications and promotions. In 2021, numerous cooperations between ETP providers and banking houses have already been concluded and made public.

These usually provide several advantages to customers. This includes the crypto ETPs that people obtain at particularly low or no cost. They have become part of the savings plan universe, and have extensive explanatory and educational material available on them.

The key takeaway

As a product manager, I am excited about the development and future development in this field. From my point of view, it’s important and within the competence of a bank’s product management to enable responsible handling and access to cryptocurrencies.

The sooner processes and industry standards are set, the sooner institutions can prevent fraud and reduce risks for the entire financial system.

The time for change is now. New technology developing and finding its way into the financial world. Banks can no longer rely on archaic practices and should continue to embrace the disruption DeFi and other technology offers.

This will not only benefit customers through lower fees, faster transactions, and an increased range of investment options. Banks will also benefit from streamlined processes, new possibilities in managed funds, and of course, happier customers.


In compliance with the Trust Project guidelines, this opinion article presents the author’s perspective and may not necessarily reflect the views of BeInCrypto. BeInCrypto remains committed to transparent reporting and upholding the highest standards of journalism. Readers are advised to verify information independently and consult with a professional before making decisions based on this content.

René Delrieux , Senior Product Manager Investing at Commerzbank AG
René Delrieux is Senior Product Manager Investing at Commerzbank AG. He mainly focuses on the analysis and development of retail and institutional offerings within digital asset...