Author – Sam Reads, UK
Bank of America admitted cryptocurrencies pose a material risk to its business model in its annual report.
In a report published and filed with the US Securities and Exchange Commission (SEC), Bank of America -one of the largest financial institutions in the world admitted that digital currencies are a threat to traditional institutions. It also listed economic, geopolitical, and operational risks in addition to cryptocurrency as they enter a new financial year.
The Sec filing stated cryptocurrencies three times; on competition threat, KYC & AML compliance and Technology Advancement. Each of them relates to the bank business risk exposure.
The bank, recently issued a ban on crypto transactions using credit cards citing customers spending beyond their means. As the ban takes effect, Bank of America stated that such policies could cost them, valuable customers and clients.
“Further, clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies.” The bank stated in their SEC filings.
Merrill Lynch, a brokerage arm of the Bank of America at the start of the year also banned its financial advisors from providing bitcoin-related investments.
AML, know-your-customer, sanctions and corruption laws
Such factors could hinder the second-largest in the US in the total asset from boosting compliance in anti-money-laundering AML and Know-Your-Customer regulation as it tries to maintain its market relevance. The company will have to invest more in technology and keep up with other trending market trends.
“Emerging technologies, such as cryptocurrencies, could limit our ability to track the movement of funds. Our ability to comply with these laws is dependent on our ability to improve detection and reporting capabilities and reduce variation in control processes and oversight accountability.” The bank stated on KYC and AML requirements.
During the credit card ban, the bank stated that the ban was a result of broader measures to reduce credit card fraud, customer overspending risk and remain AML compliant.
The bank admitted that a fast adoption of the Distributed ledger technology and the Blockchain together with other fintech innovations will require the bank to increase its technology investment as it wishes to remain relevant.
“The widespread adoption of new technologies, including internet services, cryptocurrencies, and payment systems, could require substantial expenditures to modify or adapt our existing products and services as we grow and develop our internet banking and mobile banking channel strategies.” The bank stated on technology advancement.
Traditional financial institutions are beginning to feel the impact of Cryptocurrencies. Influential and financial regulators have criticized the financial disruption created by cryptocurrencies and ICOs. The Bank of America has been drafting other blockchain-related patents in addition to 15 other filled patents. The bank is also a member of 42 global banks blockchain collaboration community.