JP Morgan announced to work with two leading crypto exchanges. The signaling effect is huge: Traditional banks can no longer ignore the blockchain industry – and they no longer have to. 

Normally, no one cares which bank a company uses for its business accounts. But the blockchain industry is not a “normal” industry when it comes to banking. In the past, getting access to the banking system was a major roadblock, especially for crypto exchanges.

That’s why JP Morgan accepting two crypto exchanges as customers was big news for the crypto ecosystem. According to the Wall Street Journal, JP Morgan opened accounts for the exchanges Gemini and Coinbase. While this is not the first time the bank has accepted blockchain business as customers, crypto exchanges have not been welcomed so far. 

Digital exchanges are increasingly recognized as professional financial services providers

A small step for Coinbase and Gemini and a big step for the entire crypto ecosystem. JP Morgan’s new openness shows that the barriers that have limited the growth of the blockchain industry in recent years are now gradually being removed.

As far as banking is concerned, fear of money laundering, security flaws, and fraud on crypto exchanges have so far hindered banks from accepting crypto exchanges as customers. In recent years, however, exchanges have become more professional and subject to stricter regulations. Nowadays, anyone who wants to trade cryptocurrencies on one of the leading exchanges has to go through a know-your-customer process and follow anti-money laundering regulations. As a result, the concerns of banks to do business with crypto exchanges are significantly lower today.

According to the Wall Street Journal, regulatory concerns were also the main reason why JP Morgan had so far avoided any involvement with crypto exchanges. During the due diligence process with Gemini and Coinbase, their licensing in the USA was a key aspect. Both exchanges are subject to the supervision of US authorities. 

Cryptocurrencies find their way into the banking system 

Cryptocurrencies are increasingly becoming a part of the banking system. JP Morgan, in particular, is establishing itself as a pioneer. The bank has launched its own JP Morgan Coin for international transactions and announced a new stablecoin last year.

With increasing legal security and growing investor interest, cryptocurrencies are also becoming increasingly attractive for banks. Since the beginning of the year, Bitcoin has gained about 20%, while the S&P 500 has lost almost 10%. Crypto assets are also playing an increasingly important role in institutional portfolio management. Last week, for example, hedge fund pioneer Paul Tudor Jones announced that his hedge fund had invested in Bitcoin Futures. 

The fact that Gemini and Coinbase now have their accounts with JP Morgan does not change anything for the moment, but the signaling effect is huge. Other banks will not want to leave the crypto business to JP Morgan and will follow suit with their own offers.