Earlier we pointed out that mortgage origination at Wells Fargo – the bank’s bread and butter – is crashing at an unprecedented pace, and as per the conference call, Q1 isn’t looking any better. Naturally, it stood to reason that the bank would seek alternative business and product lines to supplant the declining revenue it used to generate when it would originate some $100 billion in mortgages every quarter, now half that number. However, not even in our wildest dreams did we predict just what this “alternative” product would be. Because, as the FT reports, Wells Fargo, the largest US bank by market cap, is currently exploring Bitcoin as just that revenue replacement source. Per the FT: “Wells’ anti-money laundering chief, Jim Richards, has launched a group to examine how it might safely offer Bitcoin-related services or banking arrangements to virtual currency entrepreneurs, according to people familiar with the initiative.”
Wells chief executive John Stumpf said it was the bank’s practice to examine financial innovations.
“We have made enormous investments as a company and as an industry in a payments system that is secure, and we need to be sure we are up to speed with what other things are going on and their risks and rewards,” he said.
“We want to make sure we understand what it is, what it does and what it does not . . . . The world is changing and will continue to change. Whether Bitcoin will be a big part of that, who knows?”
As the FT accurately points out, “the difficulty in persuading financial institutions to offer bank accounts has become one of the biggest difficulties facing Bitcoin entrepreneurs in the US.” Which of course means it is also a great opportunity for the first entrant, such as what almost certainly appears to be Wells:
Wells’ public-private group, comprising more than a dozen members, was scheduled to meet in San Francisco on Tuesday to debate the security issues surrounding banking and Bitcoin. One possible aim would be to produce a set of anti-money laundering principles for established financial institutions to follow when dealing with virtual currency start-ups, according to a person familiar with the event.
Naturally, the US government’s desire to increasingly regulate Bitcoin has pushed it to scramble in clearing up what the legal status of Bitcoin is: “last month the Congressional Research Service circulated a report on virtual currencies for policy makers, setting out a list of areas where the legal and regulatory approach to Bitcoin remains unclear. These range from national tax issues, because Bitcoin profits are not recorded within the traditional financial system, to concerns among individual states.”
However, as HSBC and various other criminal banks have shown, if a client is willing to pay for a service, regulations and/or laws is the last thing banks are concerned with, so while the US Congress and Fed dither on how to treat Bitcoin first Wells and soon all other banks will provide some Bitcoin-related services.
Then the only question becomes whether the people who have used Bitcoin in the past precisely because it remained at more than arms length away from the big money centers, will continue to do so now that BTC is for all intents and purposes just another institutionalized asset, if not quite currency just yet.