Blockchain analysis firm Chainalysis has published a report, titled The Crypto Maturity Model: How Traditional Finance Can Adopt Cryptocurrency in Stages.
Chainalysis notes that during the past year, cryptocurrency has become a “more mainstream” asset class, with an inflow of institutional money driving Bitcoin (BTC) and other digital currencies to record prices.
Chainalysis also mentioned in its report that banking institutions can provide cryptocurrency custodial services. The company says it’s expecting to see more “mainstream” financial institutions incorporate virtual currency into their service offerings for retail and institutional customers.
Chainalysis points out that some banks have now started this process, and have launched crypto programs or confirmed their plans to do so. However, many more are assessing the market and “considering how to productize offerings around this emergent asset class,” the report from the blockchain firm added.
The report also mentioned that this is why Chainalysis has prepared the Crypto Maturity Model, which is described as a roadmap for financial institutions to provide crypto-related products. The Maturity Model defines “an iterative path for cryptocurrency product rollout, enabling financial institutions to evaluate market opportunities while in parallel addressing regulatory and compliance requirements.”
Chainalysis notes that banks can “tap into a huge opportunity by taking on cryptocurrency businesses as clients, but only if they do it safely.” According to the blockchain analysis firm, risk assessment in cryptocurrency is “easier than in most other industries due to the inherent transparency of most blockchain-based assets.”
Chainalysis explains that unlike with fiat currency, most cryptocurrency transactions are “recorded on a public ledger” which means that with the appropriate tools, banks are able to monitor cryptocurrency businesses’ transactions and “accurately size their exposure to illicit activity, ensuring every client they take on fits into their desired risk profile.”
Chainalysis’ comprehensive report reveals:
“With cryptocurrency becoming increasingly mainstream, banks are no longer viewing it as money for criminals or looking for ways to ban it. Instead, they’re recognizing the ways it can help their customers while driving revenue and trying to incorporate it into their larger strategies. While this may seem daunting at first, the Crypto Maturity Model shows that banks can adopt cryptocurrency in a structured, incremental fashion that allows them to test and improve their offerings at each step of the way.”
As noted in the report, the key is figuring out the appropriate types of products and services to develop at each stage. Chainalysis adds that the “inherent “transparency of cryptocurrency “makes this process easier.”
With the appropriate tools, financial institutions are able to aggregate the transaction data recorded on public (permissionless) blockchains, see how assets flow between various wallets and services, and use that data to “inform decisions on what kinds of cryptocurrency services make the most sense for their desired customer segments.”
From there, it’s “a matter of hiring the right people or partnering with the right crypto-native businesses to build out the necessary infrastructure for new cryptocurrency offerings,” the report noted.
You can check out the complete report here.