In Regulatory Filing, Bank of America Cites Cryptocurrency as Threat

In a required annual filing with the Securities and Exchange Commission (SEC), Bank of America has admitted that cryptocurrency poses a material business risk. This is the first time a major bank has admitted that digital currency could threaten its business interests. Bank of America outlined three areas in which cryptocurrencies could be a threat to their operations and profitability.

AML/KYC challenges

Bank of America outlined three risks presented by cryptocurrencies. In the first case, the bank argued that the existence of digital currencies will make it more difficult to comply with anti-money laundering (AML) and know-your-customer (KYC) laws. Bank of America writes

Emerging technologies, such as cryptocurrencies, could limit our ability to track the movement of funds. Our ability to comply [AML/KYC] laws is dependent on our ability to improve detection and reporting capabilities.

Lost business

Bank of America has also cited its own inability or unwillingness to adapt to a changing marketplace as a potential risk. In particular, the bank fears that customers may go elsewhere if Bank of America doesn’t offer the products customers desire:

Clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies.

Competitive pressures

The bank also cited cryptocurrencies as a potential competitive threat which would require significant expenditures to counter. Bank of America wrote:

The widespread adoption of new technologies, including internet services, cryptocurrencies and payment systems, could require substantial expenditures to modify or adapt our existing products and services.

This is probably the most bullish statement of all, from the standpoint of cryptocurrency enthusiasts, as the bank clearly sees digital currency as being a threat to its profitability and market share. Put differently, Bank of America is admitting that increased adoption and use of cryptocurrency could make some or all of the bank’s offerings irrelevant, and force them to adapt.

Bankers’ commentary

With one megabank now admitting that cryptocurrency is a threat, perhaps it’s time to reevaluate the comments of Jamie Dimon and others who have been so outspoken in their opposition to Bitcoin. If cryptocurrency is poised to make one’s business irrelevant, or just less profitable, that’s quite an incentive to trash Bitcoin in the press.

Bankers can say whatever they want to the media, but filings such as Bank of America’s give key insights. That’s because companies have a fiduciary duty to be fully honest with their shareholders about the risks and threats that exist in the marketplace. What bankers say in these types of documents – not what they say on CNBC – is what they really think.