US bank chiefs express caution over cryptocurrencies

Chief executives of several leading US banks expressed caution about dealing in cryptocurrencies in testimony released ahead of a sometimes contentious hearing before a Senate committee on Wednesday.

The remarks by Bank of America’s Brian Moynihan, Citigroup’s Jane Fraser and Wells Fargo’s Charles Scharf came as US financial regulators scramble to respond to the explosive growth — and dizzying volatility — of a crypto market that currently lacks an overarching national supervisor.

Financial groups are simultaneously facing pressure from consumers and companies that want a piece of the action — and from regulators who have openly fretted about a trading environment that “could benefit from greater investor protection”, in the words of Gary Gensler, chair of the Securities and Exchange Commission.

Moynihan hinted at the difficulties for financial executives in his testimony, saying BofA was keeping distance from the business of bitcoin and its brethren even as it continued “to evaluate the opportunities, risks and client demand for products and services related to cryptocurrency”.

“Currently, we do not lend against cryptocurrencies and do not bank companies whose primary business is cryptocurrency or the facilitation of cryptocurrency trading and investment,” he said.

Moynihan added that while his bank holds more than 60 patents involving blockchain — the ledger technology underpinning cryptocurrencies — “we still have not found a use case at scale”.

Fraser said Citigroup was taking a “measured approach” as it sought “to understand changes in the digital asset space and the use of distributed ledger technology, including demand and interest by our clients, regulatory developments and technology advancements”.

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“Before we engage with cryptocurrencies,” she said, “we see it as our responsibility to ensure we have clear governance and controls in place.”

Scharf said Wells was nearing an announcement of a pilot project using blockchain technology “to complete internal book transfers of cross-border payments within our global branch network”.

But that was as far as he went. He said: “We continue to closely and actively follow developments around cryptocurrencies, which have emerged as alternative investments products, though their status as a currency and mechanism of payment remains fluid.”

The three bankers were joined before the Senate banking committee by fellow chief executives Jamie Dimon of JPMorgan Chase, David Solomon of Goldman Sachs and James Gorman of Morgan Stanley.

Headed by Sherrod Brown, a progressive Democrat from Ohio, the committee summoned the bankers for its annual oversight hearing on Wall Street firms.

The panel was particularly interested in the response of big banks to the pandemic and by their efforts to promote diversity within their ranks and social and economic justice more broadly.

The virtual hearing’s major flashpoint was an exchange between Elizabeth Warren, the Democratic senator from Massachusetts, and Dimon over overdraft charges JPMorgan made last year during the Covid-19 crisis.

Warren criticised the bank chiefs for not issuing a blanket waiver on overdraft fees as the Federal Reserve had recommended. She focused on Dimon in particular, who she referred to as the “star of the overdraft show”, saying his bank took in almost $1.5bn in fees.

In an exchange where they often spoke over one another, Dimon said the numbers Warren quoted were “totally inaccurate” and that the bank waived overdraft fees upon request if a customer was under stress due to the pandemic.

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