BofA’s Annual Report Turns Heads; Warnings Over the Impact of Cryptos Discussed
It’s a pretty plain vanilla document that usually doesn’t draw much whoop-de-doo. Well, that’s changed a bit, and it’s all because of cryptos.
Bank of America released its latest annual this week, and one of the things that caught the attention of many was the mention of cryptos throughout the document.
Let’s go over what the second largest bank in the U.S. had to say about how it sees cryptocurrencies impacting its operations.
Factoring in cryptos with complying with the law
In its annual report, Bank of America noted how cryptocurrencies could affect it. The document drew attention to how the bank’s international operations are subject to U.S. laws on several issues. These include foreign corrupt practices, the Office of Foreign Assets Control, know-your-customer requirements, and anti-money laundering regulations.
These issues, coupled with cryptos, could present challenges for the bank. Take this excerpt from the report, for example.
"Emerging technologies, such as cryptocurrencies, could limit our ability to track the movement of funds. Our ability to comply with these laws is dependent on our ability to improve detection and reporting capabilities and reduce variation in control processes and oversight accountability."
In addition, the bank brought up the possibility of its clients choosing to conduct business with other market participants who engage in business or offer products in areas it deems speculative or risky.
And, of course, they pointed to cryptocurrencies as being the issue.
Cryptocurrencies as a threat
One of the main reasons observers of the cryptocurrency world believe that financial institution leaders have downplayed digital currencies’ impacts is due to the threat that cryptos like Bitcoin pose to them.
While many financial institution execs, like JP Morgan’s CEO Jamie Dimon, spent a good part of 2017 bashing cryptos, Bitcoin and a few other digital currencies have shown they have a considerable amount of staying power. They are also presenting a new form of competition that traditional banking advocates see as a threat.
In its report, Bank of America noted:
Also, Bank of America sees the widespread adoption of new technologies, like those related to cryptos, as requiring what it called “substantial expenditures to modify or adapt our existing products and services as we grow and develop our internet banking and mobile banking channel strategies in addition to remote connectivity solutions.”
Hard pill to swallow
The 10-K filing showed how Bank of America is recognizing the impact of cryptos, even though it may be a hard pill to swallow. The filing also revealed BofA is understanding that in order to maintain its financial stability, it had to be successful in developing and introducing new products and services as it faces the increased competition from players in the crypto space.
Bank of America has been slow to rollout any crypto-friendly products to its customers. According to CNBC, its Merrill Lynch wealth management arm banned its roughly 17,000 financial advisors from buying Bitcoin-related investments for clients.
Also, Bank of America recently joined other financial institutions, including Citi and JP Morgan, in denying credit card holders the ability to buy cryptocurrencies with their cards.
It’s unclear how long these institutions will continue these bans. What is clear is that BofA is coming to terms with how the financial world is being upended by cryptos.
"We might not be successful in responding or adapting to changes in consumer behavior, preferences, spending, investing and/or saving habits, achieving market acceptance of our products and services, reducing costs in response to pressures to deliver products and services at lower prices or sufficiently developing and maintaining loyal customers."