Of all the unlikely technologies to catch on in recent years, cryptocurrencies stand out as one of the more improbable — and unpredictable. In 2008, an anonymous author, using the pseudonym Satoshi Nakamoto, posted a white paper to an obscure cryptography listserv in which they outlined a digital currency called bitcoin. No one expected this technology to gain widespread adoption, but bitcoin eventually caught on, and by January 2022, 23% of Americans had owned cryptocurrency at some point in the prior year, according to PYMNTS data. This remarkable growth is now catching the attention of financial institutions (FIs) and raising questions about the future of crypto in banking.
“We see crypto as a really interesting and important trend — and we wanted to be a part of that,” Aaron Wollner, an executive at Quontic Bank, told PYMNTS in a recent interview.
Over the course of 2018 and 2019, Quontic Bank began noticing consumers’ growing interest in crypto. Convinced that this was a trend worth paying attention to, Quontic released a bitcoin rewards checking account in 2020, with the company NYDIG providing crypto custodial services. Quontic thus became the first FDIC-insured FI with such an account, and it was immediately surprised by the results.
Caught off Guard by the ‘Crypto-Casual’
The response from customers was largely positive, Wollner said, yet the bank was caught off guard by the types of customers signing up for the product.
Quontic had initially designed its bitcoin rewards product, which offered 1.5% back in the form of bitcoin, for “crypto enthusiasts,” or those most inclined and excited to use cryptocurrencies. During the program’s soft launch, however, Quontic discovered that these were not the customers signing up. Instead, those using it were what Wollner described as “crypto-curious,” or consumers who were not previously buying, trading or selling cryptocurrencies.
Once the bank realized this, it quickly pivoted to targeting these consumers, and crypto adoption has been steadily growing ever since. According to Wollner, the product appeals to the crypto-curious because of its passive approach to acquiring crypto. While crypto enthusiasts often want to actively buy and sell crypto and take risks, those just becoming interested might find that all too daunting.
“The beauty of this sort of product is that it’s a lean-back approach to something very complicated and intimidating,” Wollner said. “It’s a reward. You’re not buying crypto, which takes a pretty big leap and a high level of motivation to figure out.”
Crypto Will Be in Banking — the Rest Is Uncertain
Given consumers’ widespread interest in cryptocurrencies and the success of Quontic’s rewards account, it is clear that crypto will have a place in banking.
“As an asset class, crypto has proven itself. Its [adoption in banking is] already happening, with big financial institutions figuring out how to include crypto in their business model,” said Wollner. “And so, I think we’ve passed that threshold and we’ve hit a critical mass where [crypto] is somewhat proven.”
However, the unexpected response from Quontic’s customers captures how difficult it is to anticipate cryptocurrencies’ future in banking. Crypto will play a role, but what this role is and how important it will be remains to be seen. Wollner thinks that crypto will not be a passing fad, nor will it be a technology that completely takes over banking. He cautioned, however, that making specific predictions was too complicated.
“I think if you are humble about it — and you should be — you don’t really know where this is going to go,” Wollner said.
Cryptocurrency values are notoriously volatile, and there has recently been a historic downturn. It is unclear how consumers will react to this and which, if any, cryptocurrencies and crypto-related products will disappear from the market. There are also questions surrounding regulations, with governments around the world still planning how to regulate the crypto space.
“How much crypto, as a decentralized technology, is integrated with our centralized and regulated banking system remains to be seen. In the meantime, we’re proud to offer a way for people to passively earn bitcoin in the form of a debit card reward,” Wollner said.
While the bank does believe in the future of crypto and plans to release more crypto products, it does not see itself as a crypto bank and does not plan to become one. At the end of the day, Quontic, like any FI, wants to provide the solutions its customers need to succeed. Its crypto product is just one of the many ways it is working to provide customers with innovative solutions.
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