Financial professionals see a bright future for cryptocurrencies, yet the vast majority say legal and regulatory concerns are causing their clients are keeping their distance, according to a new study.
In a survey released on November 6, blockchain analysis firm Chainalysis found that almost half of the financial professionals surveyed at an anti-money-laundering (AML) conference believe that Bitcoin (BTC) will outperform the stock, bond, and housing markets over the next 12 months.
Yet, only 11% said more than one quarter of their clients have bought bitcoin or other cryptocurrencies. More than 60% said no more than a tenth of their clients invest in cryptocurrencies.
One third of those surveyed said none at all do, and another 13.5% said they didn’t know one way or the other, Chainalysis found.
“Many finance professionals understand that cryptocurrency presents a massive opportunity, yet institutions are hesitant to enter the market due to perceived risk,” said Michael Gronager, Co-Founder and CEO at Chainalysis, in a statement. “[S]ome don’t even realize the exposure that they already have to cryptocurrency.”
Given the professional focus of that data pool, it shouldn’t come as a surprise that compliance concerns were the biggest reason, cited by almost 60% of the 350 bankers, financial service providers, and regulators Chainalysis surveyed at the Association of Certified Anti-Money Laundering Specialists’ 19th Annual AML & Financial Crime Conference in early October.
Nearly 40% specified that “the inability to control for illicit activity facilitated by cryptocurrency,” was their top concern.
Blockchain analysis can “can help institutions and exchanges monitor transactions and detect criminal activity,” Gronager added. “[T]hese tools will allow the financial sector to mitigate existing risk, provide banking services to cryptocurrency businesses, offer new opportunities to clients, and ultimately promote transparency and build trust in blockchains.”
Compliance is a growing issue for exchanges and blockchain developers. Over the summer, the Financial Action Task Force (FATF), an intergovernmental AML watchdog, ruled that cryptocurrency exchanges must follow the “travel rule.” That requires money transmitters to identify and store data on senders and recipients of cryptocurrency transactions.
That’s why cryptocurrency exchange Binance made a big point of announcing this week that cryptocurrency intelligence and blockchain security firm CipherTrace had rolled out AML support for its Binance Chain and associated BNB cryptocurrency.
“This is a major win for the community-driven Binance Chain,” said Samuel Lim, Binance’s chief compliance officer, on November 5. “This partnership [will] ultimately encourage greater community involvement, developer participation, and public interest in Binance Chain and pave the way for larger mainstream adoption.”