Why Banks Are Finally Talking Crypto In Filings

“We don’t have them on the ropes yet but we definitely have them scared.”

That was the assessment of CoinDesk reader FireFox Bancroft, commenting on our story last month about Bank of America’s mention of cryptocurrency in the “risk factors” section of its annual filing with the Securities and Exchange Commission.

“Scared” might still be a bit of an overstatement. But it’s clear from the latest round of annual reports (also known as 10-K filings) that financial institutions, ranging from B of A’s gargantuan peers to regional players, are taking bitcoin and its brood more seriously than they did a year or even six months ago.

That change is a reflection of how far cryptocurrency and blockchain technology have come in a short time, not only in terms of valuation but also public awareness, even if widespread consumer adoption remains distant.

For Bank of America, the threat is twofold: cryptocurrency use could make it harder for the bank to trace financial flows in order to comply with anti-money-laundering laws, and the technology is a potential competitor to traditional financial intermediaries.

Echoing the latter concern, JPMorgan said some financial services business lines, including payment processing, “could be disrupted by technologies, such as cryptocurrencies, that require no intermediation.” It was a striking acknowledgment from a company whose CEO famously called bitcoin a fraud (though to be fair, he did later express regret over that remark).

But it’s not just Wall Street that’s got crypto on its radar. Main Street banks like WesBanco in West Virginia and IberiaBank in Louisiana also mentioned potential competition from the technology in their 10-Ks. Again, these are not the too-big-to-fail behemoths that Occupy and Elizabeth Warren rail against; they’re the successors to the Bailey Building & Loan in “It’s a Wonderful Life,” the institutions that host barbecues for the local chamber of commerce and march in the town parade. And they think they might plausibly lose some customers to crypto.

Perhaps the least surprising company to join this club was Goldman Sachs, considering that the investment bank started clearing bitcoin futures for clients toward the end of last year, though it’s not directly touching crypto.

Square is, however, through its Square Cash app’s bitcoin-buying feature, and one of the risk concerns cited by the payments company reflected this deeper involvement.

It warned that accounting rules for publicly traded companies aren’t clear on how to treat cryptocurrency. So there’s the possibility that if auditors or regulators disagree with method Square uses, it may have to restate previously reported results. Which is rarely good for a company’s stock price…

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