Traditional Finance Firms Are Building the Infrastructure For Digital Assets – But What Are They Really Focused On?

Thoughts from GemCap UK Non-Executive Chairman Jonny Fry, on the infrastructure changes traditional finance firms are making in preparation for digital assets, and what the bigger picture might be.

Global financial institutions have built the infrastructure to buy, sell and store cryptocurrencies. However, given that cryptos are relatively small in terms of adoption and market capitalisation, is there a hidden agenda as we see the financial services sector digitally transforming its products and services?

Despite the recent falls in the value of cryptocurrencies – the market capitalisation of the crypto market has fallen from $3 trillion to under a $1 trillion – there is a growing number of institutions offering access to digital currencies. Incredible really, when you consider how small the actual crypto market is, that many financial newspapers and the press in general still mention it on a regular basis. By now many will be aware that the biggest crypto, Bitcoin, still accounts for over 38% of the entire crypto market capitalisation. Having risen in value from $0.01 to (at one stage) over $64,000, the fear of missing out (FOMO) would still appear to be a strong driver amongst private investors and institutions alike.

Although cryptocurrencies are highly volatile and still a small asset class, almost every week another regulated financial services organisation launches a new service or announces its engagement with cryptos. When you see former FBI staff making statements such as this one from Gurvais Grigg, Chainalysis’s CTO and former FBI Assistant Director, it’s easy to understand why we are seeing ongoing interest from banks, asset managers, exchanges, etc:

Unlike other forms of fraud in Fiat, with cryptocurrency in the blockchain… there’s a record… and that transparency and speed of accessing that record globally makes investigations of these types of fraud accelerate over traditional finance.

The adoption and growth in the infrastructure which enables cryptos to become even more mainstream shows no sign of abating. Mastercard has sponsored a survey of 35,000 people and found that 91% had heard of crypto and half were interested in using crypto to mail payments, and recently CNBC has reported: “Mastercard and Visa have both been signing up new partners and become even more involved in the crypto sector.” Mastercard has teamed up with crypto firm Bakkt to let banks and retailers offer crypto-related services. Visa has more than 70 crypto partnerships and has now agreed a deal with FTX to offer crypto debit cards in 40 countries. Not to be left out, American Express has revealed it is exploring how to allow stablecoins to be used on its network. Smaller payment platforms are also engaging with stablecoins – for example, Jack Dorsey (founder of Twitter and reportedly worth over $7billion) has a payment business called TBD, which has tweeted:

We’re partnering with [Circle] to solve some of our biggest money challenges, including decentralized, global on-and-off-ramps between fiat and crypto worlds that can power global use cases from cross-border remittances to self-custody of stablecoins.”

There’s a long list of other payment platforms offering crypto-related services, but relatively few banks exist which have been prepared to offer on ramp/off ramp crypto services i.e. enabling one to buy or sell crypto using a bank account.

An often-cited question is: “How can I use my crypto?” Surprisingly, there are literally millions of merchants around the world that accept Visa or Mastercard. Furthermore, via their platforms one can spend crypto using a crypto debit card, such as Alternatively, there are a host of smaller firms alongside many global companies that accept Bitcoin as a form of payment – lists some of them here. So, for retail investors, it is relatively easy to spend crypto. But you may also question, “Why should I care about crypto?” The fact is, crypto is merely a rounding error and valued at $1 trillion – when you compare it to the asset management industry that is worth over $100 trillion, or the real estate sector that Savills cites as being worth $326trillion. Digital assets have certainly been on the radar for the world’s biggest custodian bank, BNY Mellon, with $43 trillion of assets in custody. Furthermore, it has just launched a crypto custody service enabling its clients to hold crypto and have the same protection as if they were holding cash, equities bonds or any other asset. Having surveyed 271 institutions, BNY Mellon has recently issued a report, “Migration to Digital Assets Accelerates”, and the results may surprise some. The research shows that “70% of respondents would increase their digital asset activity if services like custody and execution are available from recognized, trusted institutions. Despite the market downturn, 88% are moving forward with their plans. The study further indicates that almost all institutional investors (91%) are interested in investing in tokenized products.”

Institutions and digital assets

Source: BNYMellon

As BNY Mellon has revealed, whilst the headlines are often about crypto, possibly the real reason behind why they (along with many other global financial institutions) are building an infrastructure for digital assets is less about crypto and more about the digitalisation of the financial services sector as this is where the real money is. We have already seen asset managers such as JP Morgan, Abrdn, Kohlberg Kravis Roberts and Franklin Templeton announce they are to digitise funds. Back in 2018, the World Bank issued its first digital debt instrument and now SWIFT has recently made an announcement that it has “successfully shown that central bank digital currencies (CBDCs) and tokenised assets can move seamlessly on existing financial infrastructure.” With a financial infrastructure that encompasses over 11,500 institutions globally, does this mean that digital assets could be bought, sold and stored on a peer-to-peer basis, i.e., without the need to involve a third party? If this is the case, then, as we see the financial services sector digitally transforming its products and services, many firms will need to revaluate their business models – so, could this be the real agenda?

Jonny Fry

Non-Exec Chairman, GemCap UK

In other news...


You must submit your agreement before access to the site can be granted. Important information regarding our Cookie Policy can also be found here


October 2022   This website is directed at institutional clients and individuals who have taken appropriate professional advice, who possess the necessary experience, knowledge and expertise to make their investment decisions and properly assess the risk that it incurs. Gemini Capital Management (Ireland) Limited (“GemCap”), trading as GemCap, is a limited liability company registered under the registered number 579677 under Irish law pursuant to the Companies Act 2014 which is regulated by the Central Bank of Ireland, reference number C155302. Its principal office is at Suite 22-26 Morrison Chambers, 32 Nassau Street Dublin 2, D02 X598 and its registered office is at 7th Floor, Block A, One Park Place, Upper Hatch Street, Dublin 2, Ireland. GemCap acts as management company and global distributor to GemCap Investment Funds (Ireland) plc (“UCITS”). GemCap Investment Funds (Ireland) plc is an umbrella fund with segregated liability between sub-funds incorporated as an investment company with variable capital registered under the registered number 485081 under Irish law pursuant to the Companies Act 2014 and authorised by the Central Bank of Ireland, reference number C67292, pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (as amended) ), having its registered office at 7th Floor, Block A, One Park Place, Upper Hatch Street, Dublin 2, Ireland(“the Fund”) . The contents of this site have been prepared solely for information purposes and is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. GemCap and the Fund does not give or make any guarantee, representation, warranty or other promise or confirmation (whether express or implied) as to its accuracy or completeness.   Risk Warnings Please remember that the value of investments and the income from them can fluctuate (this may partly be the result of exchange rate fluctuations) and you may not get back the full amount invested. Past performance may not a reliable guide to future performance. A comprehensive list of risk factors is detailed in the Prospectus and the key investor information document (“KIID”) and an investment should not be contemplated until the risks are fully considered. The Prospectus and KIID can be viewed at GemCap does not provide financial, investment, tax or any other professional advice in any way and none of the information on this site should be construed as such. None of the information contained on this site constitutes an offer to buy or sell or a solicitation, recommendation, invitation by or on behalf of GemCap to buy or sell any security, product, service or investment. Any opinions expressed on this site do not constitute investment advice and independent advice should be sought where appropriate. The view and/or opinions expressed by GemCap through this or any other platform, may be subject to change. The shares in the Fund have not been and will not be registered under the US Securities Act of 1933 (the “1933 Act”) as amended or the securities laws of any of the states of the United States. The Shares may not be offered, sold, transferred, pledged or delivered, directly or indirectly, in or into the United States or to or for the account or benefit of any US Person except pursuant to an exemption from, or in a transaction not subject to the registration requirements of the 1933 Act and any applicable state laws, nor in any jurisdiction in which the Fund is not authorised to be publicly sold. The Fund is available only in jurisdictions where their promotion and sale are permitted. The information contained on the website may not be redistributed directly or indirectly to any citizen or resident of the United States or any other jurisdiction where its distribution may be restricted by law. It is the responsibility of persons accessing the website to ensure compliance with the above.   Disclaimer for Investors in Switzerland The Fund and its sub-funds, Calamos Global Convertible Fund and Third Avenue Real Estate Value Fund has been approved by the Swiss Financial Market Supervisory Authority FINMA (“FINMA”) for offering to Swiss non-qualified investors. This website may contain advertising. In Switzerland, the representative is ACOLIN Fund Services AG, Leutschenbachstrasse 50, CH-8050 Zurich, whilst the paying agent is Banque Cantonale Vaudoise, Place St.-François 14, CH-1003 Lusanne. Swiss investors may obtain free of charge from the representative in Switzerland, the relevant fund documents, namely the prospectus, the key investor information documents, the articles of association, as well as the annual and semi-annual reports. Past performance results are no indication of future results. Issuance and redemption commissions are not included in the performance figures. Performance results referring to a period of less than twelve months (year-to-date-performance, start of investment fund within the last twelve months) are no reliable indicator for future results due to the short comparison period.   Additional information for Qualified Investors in Switzerland: The below-mentioned investment funds, which are also disclosed on this website, are neither registered with FINMA nor under contract for representation to Swiss investors. These investment funds may not be distributed neither to Swiss non-qualified and qualified investors nor exclusively to Swiss qualified investors:   GemCap Investment Funds (Ireland) Plc Atlantic House Defined Returns Fund Atlantic House Global Defined Returns Fund Atlantic House Total Return Fund Atlantic House US Enhanced Equity Fund Atlantic House Uncorrelated Strategies Fund Calamos Global Convertible Fund Calamos Growth and Income Fund Causeway Defined Growth Fund GSI Global Sustainable Value Fund GSI Global Sustainable Focused Value Fund London & Capital Global Balanced Fixed Income Fund London & Capital Global Conservative Fixed Income Fund London & Capital Global Defensive Equity Fund (this Fund has terminated and accordingly, Shares in this Fund are no longer available for investment) London & Capital Global Growth Fund London & Capital Global Growth Fixed Income Fund London & Capital Global Star Equity Fund London & Capital Global Balanced Fund London & Capital Global Equity Opportunities Fund Principal Asset Allocation Fund Semper Total Return Fund TEAM International Equity Fund Third Avenue Real Estate Value Fund   Legal This GemCap website and material contained herein (including information from third parties) is provided ‘as is’, without any representation or endorsement made and without warranty of any kind whether express or implied, including, but not limited to, the implied warranties of satisfactory quality, fitness for a particular purpose, non-infringement, compatibility, security, completeness and accuracy. By entering this site, you acknowledge and agree that the use of this site is at your own risk and to the extent permissible by applicable law, in no circumstances, including (but not limited to) negligence, shall GemCap be liable for any direct, indirect, incidental, special, consequential, or punitive damages, losses, costs or expenses nor for any loss of profit that results from the use of, or inability to use this site or any material on any site linked to this site (including but not limited to any viruses or any other errors or defects or failures in computer transmissions or network communications) even if we have been advised of the possibility of such damage. In addition, no liability can be accepted by GemCap in respect of any changes made to the content of this site by unauthorised third parties. All express or implied warranties or representations are excluded to the fullest extent permissible by law. We do not warrant that this site does not infringe any intellectual property rights of third parties. No data transmission over the internet can be guaranteed as totally secure. Whilst GemCap strives to protect such information and every effort has been made to implement security protocols, in line with relevant legislation to ensure safe processing and storage of any data transmitted, we do not guarantee and cannot ensure the security of any information which you transmit to us. Accordingly, any information which you transmit to us is transmitted at your own risk. The GemCap website is not a substitute for independent professional advice and users should obtain any appropriate professional advice relevant to their particular circumstances. The information on this site is issued by GemCap.   Cookies If you use the internet quite a bit, there’s a good chance you’ve heard of cookies. But what are they? Also known as HTML cookies, tracking cookies or magic cookies, these tiny files are automatically downloaded by your computer when you’re browsing online. Don’t worry – they’re perfectly safe. But we’d still like to take a moment to explain what cookies do, which ones we use and how to remove them – if you really want to. Are Cookies Safe? Yes, cookies are safe. The information they collect is completely anonymous. We never, ever, collect personal information using cookies. What’s more, cookies are not harmful to your computer, they take up minimal space and they can be removed with just a few clicks. GemCap’s Cookie Functionality
  • Cookies provide enhanced functionality and speed to our site
  • These cookies help us to recognise your computer when you visit and enable us to improve your visits to our website
  • Cookies assist us in identifying what kind of visitor/user you are, for us to provide you with the most relevant content
How Can I Remove Cookies? Most computers are set to download cookies automatically, so if you’re happy with everything you’ve read, simply carry on as you were. However, if you’re at all concerned about having cookies on your computer, deleting them is simple. Show me how to remove cookies Likewise, you can also change your computer settings so that it won’t download any more cookies. Show me how to change my cookie settings The information on this site is issued by Gemini Capital Management (Ireland) Ltd, which is registered in Ireland No. 579677. The registered address for the company is 7th Floor, Block A, One Park Place, Upper Hatch Street, Dublin 2, Ireland. For further information on our use of personal data collected and stored by the firm and its approved vendors, please see our Data Protection Statement, which can be found in the “Our Policies” section on this website.