Customers would be able to buy and sell bitcoin on mobile banking apps with the help of fintech NYDIG by the first or second quarter of 2022. This initiative was established by a group of jet-setter community banks (estimate of 300 banks), some of which unveiled their plans in June. The Independent Community Bankers of America and the American Bankers Association started investing in this company to show their support.
In the initial months since they announced, they have successfully resolved several regulatory and security concerns, according to many of their participants. They have also successfully integrated NYDIG's technology with the vendors and completed their partnerships.
In a statement, Harold Reynolds, the CEO of the $1.3 billion-asset BankSouth in Greensboro, said; they have seen a significant amount of activity in the cryptocurrency transactions and a few substantially significant investments in their customer's accounts. Reynolds is to roll out bitcoin trading in his banks' app by midyear. According to A blog posted Tuesday by ABA CEO Rob Nicholas, 16% of Americans have used, traded, or invested in cryptocurrency regardless of the uncertainty that remains about the future of these assets, and we are confident that they aren't going away any time soon. It is worth noting that bitcoin trading can help with customer retention and revenue growth and increase banks' competitive edge.
Surprisingly enough, the first bank (Vast Bank in Tulsa, Oklahoma) that partnered with Coinbase and started supporting cryptocurrencies purchases through its checking accounts was not affiliated with NYDIG. The Vast bank now supports 12 types of cryptocurrency and has been running smoothly since its launch, according to the bank's CEO of the $783 million-asset bank Brad Scrivner. They are now in all 50 states and three U.S. territories and have grown approximately five times their historical retail customer base in the first four months.
BankSouth has recently invested in NYDIG (declined to disclose the amount) and has conducted bitcoin trading beta-testing with their digital banking provider NCR and NYDIG.
"We will be a value-add and gain exposure to more investments said, Reynolds. Our customers will get a better banking experience and ROI by bringing fintech to BankSouth.
Sebade said that by utilizing the recommendations made in the book The Three-Box Solution: A Strategy for Leading Innovation and using the book's so-called third box, they would be building their new business model. This approach will allow BankSouth to pioneer the fintech investment space.
Based in Columbus, Georgia, Synovus Financial has seen an increase in customers pulling money out of their accounts and investing it in digital assets. That's why Synovus Financial plans to launch bitcoin trading in their mobile banking app and has invested in NYDIG.
Traditionally, banks lend based on physical assets like commercial real estate, equipment, heavy machinery, etc. However, recent trends indicate that digitized assets and blockchain-based securities have an irrefutable record of ownership and value.
Cryptocurrency is the leader in this movement, in Bishop's opinion.
We are rebuilding our operational structures by pivoting our backend processing towards working with blockchains knowing that cryptocurrency is here to stay.
We are ensuring success by partnering with companies like Synovus that are leaders in safety, risk programs, security protocols, and thoroughness with regulators and examiners.
Patrick Sells, chief innovation officer at NYDIG, said, "Bitcoin purchase involves a public key and a private key". The public key is the equivalent of an email address at which a buyer can send bitcoin, and the private key is the equivalent of a password.
"However, unlike a password, if it's lost, stolen, or hacked, it can't be reset; that is the reason you hear stories about people who lost $200 million of bitcoin or a crypto exchange were hacked, and people lost their bitcoin."
To avoid such situations, bitcoin buyers can store their private keys in a hot wallet (software or an app on the internet) or cold storage (a device or server that is not connected to the internet).
NYDIG uses cold storage to eliminate cybersecurity risks.
NYDIG's security works in a closed ecosystem; the bank customer can use funds from their bank to purchase bitcoin with NYDIG. However, it can't be transferred out to a different wallet. This process de-risks the bitcoin to be stolen from a bank partner's mobile app. The NYDIG stored bitcoins can only be sold for cash, and subsequently, they can be deposited into any bank account.
It's been five years since ICBA started investing in fintech startups through the ThinkTech accelerator sponsorship program in Little Rock, Arkansas. This initiative has made them more comfortable in investing in small angel-type investments in startups, according to Cary Ransom, managing director of BankTech Ventures (Community bankers fund with support from ICBA).
The idea of BankTech investing in NYDIG was encouraged by the ICBA, said Ransom (the investment amount was not disclosed). He also says that many banks that invest in BankTech Ventures are interested in working with the NYDIG.
Our banks' interest in bitcoin is outrageous, and we don't want that capital to leave the bank.
That's the reason they came up with a solution that they feel confident, compliant, and secure in introducing to their clients.
NYDIG limiting their support to bitcoin gives our bankers comfort, said Ransom.
Risk Management is key to success in the banking world; therefore, hedging the potential risks is the basic fundamental of the bankers' mindset. To continue innovating and evolving, they must always do it in a risk-managed way.
Nicholas said the reason behind American Bankers Associaton investing in the NYDIG is their compliance-first approach, their connections with tech ventures, and the fact that they support banks rather than competing with them.
American Bankers Association says the key to success is that banks should have access to regulatory frameworks and tools to help their customers meet their goals and needs.