More and more banks continue to wade into the crypto ecosystem with a sharp eye for both trading profits and the ability to score fees to hold crypto assets via custody solutions. Another name that we’ve attempted to ignore for nearly a month is Barclays. Their current CEO, Jes Staley, publicly denied any movement on or in the crypto space last fall, but he was being coy, to say the least. Continued exploration and progress is being made.
A word about European banks at large and Barclays in particular. They are, amongst the global IB set, the most concerned about crypto and its ability to displace their goods and services long term. The revenue base and profits of the likes of Barclays, Credit Suisse, Deutsche Bank, Santander, and others have gotten pressed down to levels not seen in more than a decade and a half. You may recall that Binance approached and surpassed the quarterly revenue of Deutsche Bank in the last quarter of 2018. An incredible feat given that Binance opened its doors for business less than two years ago.
Back to Barclays and their renewed interest in bringing crypto architecture to both institutional and UHNW clients. They are acutely aware of what Goldman Sachs is embarking on and where the global IB leader, that is Goldman, is about to take the industry with respect to crypto. And the sole reason, as it goes for bankers, that this move is on the way, is that profits can be extracted from the architecture being built.
Barclays needs new lines of revenue and profits. Pure and simple. That is the impetus behind the continued search for answers in crypto and the right time and place to roll out a crypto framework. As was discussed near the middle of 2018, Barclays has been discussing solutions with crypto hedge funds to understand their wants and needs.
A hedge fund contact on the west coast put it this way: “We’ve heard from Barclays, and by no means are they the only firm we consistently hear from, three different times so far in 2019. The pick up in communication seems to be mirroring other institutional initiatives that they may be able to conjoin with to put together framework that doesn’t cost them an arm and a leg to build and staff. If I had to guess how many people are working on the project there (Barclays) I would put the number at 10, maybe 12. It isn’t a massive number by any means, but it isn’t zero either. And I doubt they will be first to market with anything…but they are preparing to at least come to the party.”
An interesting take on the inner workings of building crypto architecture and the ‘hive mind’ of decision makers at the firm. How best to position themselves if and when the institutional need becomes to serious that they can’t ignore the money to be made. It will be interesting to evaluate Jes Staley’s future comments about crypto and the firms involvement. Will it ‘evolve’ in the same way that JP Morgan’s Jamie Dimon did? It wouldn’t surprise us.