Crypto coin with eyepatch
Illustration: Christopher T. Fong/Protocol

America’s oldest bank becomes a HODLer

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Friday: institutional crypto buy-in, Apple’s savings account, and another Tornado Cash lawsuit.

Big banks dabble in crypto

America’s oldest bank is dipping its toes into the finance world’s newest trend. But BNY Mellon’s announcement that it will begin holding crypto assets for its customers comes a week after the Treasury Department warned about big banks and investment firms dabbling in digital assets.

Institutional investors want in. The crypto craze is strong on Wall Street, with 91% of institutional investors saying they’re interested in “investing in tokenized products,” according to BNY Mellon’s survey.

  • About 41% already hold crypto in their portfolio, while 15% said they plan to add digital assets in the next two to five years. CEO Robin Vince said in a statement that it makes sense for BNY Mellon to join the party, given that the bank has the “scale to reimagine financial markets through blockchain technology and digital assets.”
  • Other big institutions are already in crypto. BlackRock, the world’s biggest asset manager, has teamed up with Coinbase to offer clients access to bitcoin and other cryptocurrencies. State Street said it plans to offer digital custody services for cryptocurrencies and other digital assets.
  • JPMorgan Chase has invested in crypto companies, including blockchain intelligence company TRM Labs, despite CEO Jamie Dimon’s public skepticism about crypto. Just last month, Dimon dismissed crypto tokens as “decentralized Ponzi schemes.”

There are serious risks “from concentrated exposures” to big banks and institutions, according to a newly released report on crypto by the Financial Stability Oversight Council, part of the U.S. Department of the Treasury.

  • The crypto crash wiped out $2 trillion in value in just a few months. The good news is the U.S. banking system’s exposure to crypto appears “to be very limited,” so the market collapse had little impact on the overall financial system, the report said.
  • But “small exposures have the potential to grow rapidly.” That can turn into a huge problem given how the crypto ecosystem lacks “basic risk controls to protect against run risk” and crypto assets “appear to be primarily driven by speculation rather than grounded in current fundamental economic use cases.”

It’s a crypto Catch-22. Banks are “waiting on regulatory clarity” before going deeper into crypto, the report said. But these much-anticipated regulations could trigger the crypto expansion in the financial system that worries the Treasury Department.

  • “It's sort of a double-edged thing,” said Klaros Group director Patrick Haggerty. U.S. government regulators have seen crypto growing “very fast” over the past two years. “If they don't bring it into the regulatory perimeter, it's a little harder to do it once it’s a more powerful lobby group. So bring it in now,” he told Protocol.
  • The crypto industry is evolving, said Jesse Proudman, vice president of crypto investing at Betterment. There have been bad actors, but there are also “actors here who all are trying to do the right thing” and “are trying to operate within the bounds and the objectives of being a good operator” even though “it's a challenge to do that without that clarity,” he told Protocol.
  • In an ironic twist, the crypto crash has actually brought some clarity. “Getting over-levered players out of the market and then having some road map for regulations — that's good for institutions. They're happy about that,” said Jeffrey Howard, an executive with OSL, a digital asset trading platform and services company.

“We have seen significant shocks and volatility” in crypto, Treasury Secretary Janet Yellen said when she announced the FSOC report last week. The government is worried about even more devastating shocks if more giants of finance ride the crypto wave.

— Benjamin Pimentel (email | twitter)


Today’s cross-border payment infrastructure is slow, expensive, and inefficient. But digital assets have the ability to make delayed settlement times and high transaction fees a thing of the past.

Learn more

On the money

The Treasury Department is facing another lawsuit over its Tornado Cash sanctions.The crypto-focused think tank Coin Center's lawsuit is asking the government to remove Tornado Cash from the sanctions list.

Sen. Elizabeth Warren singles out Wells Fargo for Zelle fraud.Warren wrote in a letter to Wells Fargo's leadership that the bank's customers had a higher rate of fraudulent transactions on the peer-to-peer payment network than similar-sized financial institutions.

Crypto hacks have already reached new heights this month. Chainalysis reports that with $718 million stolen across 11 different hacks, "October is now the biggest month in the biggest year ever for hacking activity, with more than half the month still to go."

Tether says it has exited commercial paper investments. The issuer of the world's largest stablecoin, which has faced scrutiny from regulators, said it replaced its commercial paper holding with U.S. Treasury bills.

Apple is launching a savings account

Apple will team up with Goldman Sachs on a savings account for its cardholders, the latest expansion from the tech giant into financial services.

Apple said Thursday that holders of the Apple Card will soon be able to open a "high-yield" savings account through Goldman that will connect to Apple's mobile wallet. The new savings account would include an option to automatically deposit Daily Cash rewards — Apple's term for the cash back it offers on purchases.

Apple's announcement did not say when the savings account will be available, and didn't include an estimate for the interest rate it will offer. Goldman's Marcus savings account offers 2.15% APY.

Read the full story.

— Ryan Deffenbaugh (email | twitter)

The chart

Decentralized finance was a hot trend in finance in 2021, but the crypto crash saw a dramatic drop in the total value of digital assets in the DeFi ecosystem.

The total value “locked” — or the overall value of crypto assets — on all DeFi ecosystems soared from about $15 billion in January 2020 to $180 billion in December 2021 before plunging to around $70 billion earlier this year.


Today’s cross-border payment infrastructure is slow, expensive, and inefficient. But digital assets have the ability to make delayed settlement times and high transaction fees a thing of the past.

Learn more

Thanks for reading — see you Monday!

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