For the first several years of the “digital assets revolution,” wholesale banks sat on the sidelines, missing out on nearly the $4 billion to $5 billion in revenue earned by corporate and institutional clients last year. The lack of a clear regulatory framework has been the biggest barrier for banks that service corporate clients rather than people or small businesses, according to analysts led by Betsy Graseck. On the other hand, greater regulation may not be a panacea, as it may encourage more direct engagement from institutional investors, leaving banks on the sidelines. Wholesale Banks have Various Advantages Against “Crypto Natives” According to the report, wholesale banks have various advantages against “crypto natives” that may allow them to catch up when the sector is transformed by regulation. Wholesale banks gain from “experience operating in a regulated environment, business models built to produce returns when margins compress and capital needs increase, and trusted counterparty status for institutional clients,” to name a few advantages. According to Morgan Stanley, direct engagement in the crypto ecosystem could provide up to $5 billion in revenue and $1 billion in economic value for wholesale banks. In the next three to five years, that revenue might rise to $16 billion, with greater chances for efficiency gains from consolidating the infrastructure for various wholesale banking companies. Wholesale banks have t...
