Two-thirds of banks say distributed ledger technology and crypto-related products will not be prioritized as part of their growth and development strategy over the next two years, according to a Federal Reserve survey of senior financial officers from 46 domestic financial institutions and 34 foreign banks.
Most respondents said digital ledger technologies or crypto-related products would not have major impacts on their liquidity management practices over the next decade. “Some respondents noted that their bank is actively monitoring the situation and will adapt to the landscape as needed,” the Fed stated.
The survey, which was conducted in May, came as the Fed continues studying the potential launch of a central bank digital currency. The market capitalization of all cryptocurrencies reached a record $2.6 trillion last year. JPMorgan Chase, Morgan Stanley and Goldman Sachs have dedicated groups for cryptocurrency and its underlying blockchain technology. JPMorgan has more than 200 employees working in its Onyx division. Still, major instability remains in the market: Cryptocurrencies have lost $2 trillion in value since the peak of a large rally in 2021. Bitcoin, the world’s largest digital coin, has fallen 70 percent from a November record high of nearly $69,000.
When asked about reserve balances, senior financial officers expected them to fall as a share of total assets through the end of the year. They most often cited loans as the asset bucket likely to increase through the end of 2022. More than half of banks said they don’t plan to change the size of their balance sheets for the remainder of the year.