Encryption assets quickly gain institutional recognition, banks and listed companies are entering the market one after another.

Tesla's investment in Bitcoin has sparked a heated discussion in the market. The company invested $1.5 billion to purchase Bitcoin, and just 10 days later, it gained $800 million in floating profits, exceeding the profits from its car manufacturing business over the past decade. Meanwhile, other institutions have also joined the ranks of Bitcoin investors. MicroStrategy has once again raised $1.05 billion through convertible bonds to continue increasing its Bitcoin holdings, having purchased over 70,000 Bitcoins since last year.

This investment enthusiasm reflects the recognition of Bitcoin's status as a "safe haven" in the era of global monetary easing. In addition to these actively buying institutions and wealthy individuals, traditional banking has also accelerated its embrace of encryption in the past two years, paving the way for its broader acceptance in the future.

The following is an overview of the current participation of the banking industry and major listed companies in the encryption industry, and these trends undoubtedly enhance investors' confidence.

Banking Industry and Encryption Enterprises: Bidirectional Opening, Accelerating Integration

A major concern of regulators regarding the encryption market is the lack of reliable custody methods, which has led to many institutions in the encryption industry being unable to access complete banking services. This situation underwent significant changes in 2020.

According to statistics, a total of 35 banks have shown friendliness towards the encryption industry and have established substantial business dealings with encryption native enterprises. Among them, 11 are located in the United States, 10 in Switzerland, and the others are mainly distributed across financial centers in the United Kingdom, Germany, and Malta. The median assets of these banks amount to $866 million, with a total of 6 banks having assets exceeding $2 billion.

The United States' leading position in the encryption banking industry not only stems from its long-term continuous exploration of the encryption sector but is also closely related to a series of administrative orders issued by the Office of the Comptroller of the Currency (OCC) last year. These policies have facilitated the rapid integration between crypto-native enterprises and banks.

For example, the payment charter launched by the OCC allows crypto-native companies such as Kraken, Paxos, and BitGo to upgrade their state trust company licenses to national trust bank licenses. The OCC has also opened a channel for the U.S. banking industry to directly custody crypto assets, even allowing banks to use public chains and crypto dollar stablecoins as infrastructure for payments, clearing, and settlements in the future.

Many banking giants have begun to take action or express their stance. A large bank has already provided banking services to several licensed exchanges in the United States. The bank's co-president recently stated that they will eventually have to launch Bitcoin services. One of the world's largest custodial banks announced that it will launch a new digital currency custody division in 2021 to assist users in trading digital assets, including encryption assets.

Switzerland is another noteworthy hub for encryption-friendly banks. In 2019, the Swiss Financial Market Supervisory Authority (FINMA) opened the application for banking licenses to qualified encryption companies and allowed traditional banking institutions to participate. In the same year, FINMA approved several of the country's large traditional banks to conduct encryption asset custody business and issued licenses to banks based on encryption asset operations.

In Asia, a leading bank in Singapore has launched an integrated platform for the issuance, trading, and custody of digital assets, initially supporting exchange services between major encryption currencies such as Bitcoin and Ethereum and various fiat currencies.

Bitcoin Becomes Standard for Listed Companies, Institutional Investors Actively Entering

The ongoing development of traditional large banks and encryption banks has provided a foundation for companies like Tesla to enter the market, while an increasing number of listed companies allocating Bitcoin has prepared ample peers for Tesla.

According to statistics, there are currently 19 publicly listed companies in North America/Europe that have allocated Bitcoin, and there are also some "quasi-ETF" funds managing a large amount of Bitcoin. The total amount of Bitcoin held by these institutions reaches 948,720 coins, accounting for 4.747% of the total Bitcoin supply.

It is worth noting that a certain fund's business experienced rapid growth in 2020, with its assets under management (AUM) increasing nearly 50 times, from over $17 billion at the beginning of 2021 to $43.626 billion as of February 20.

The market expects more competitors similar to these funds to emerge in 2021, and there is a significant possibility that the long-unapproved Bitcoin ETF in the United States will be launched this year, potentially offering more competitive management fees.

For example, a newly launched Bitcoin trust fund has an annual management fee rate of only 1.75%, which is 0.25 percentage points lower than a well-known fund. Recently, Canada has seen the trading of two Bitcoin ETFs, one of which reached a single-day trading volume of $165 million, attracting the attention of international investors, including those from China.

For publicly listed institutions like Tesla, they will have more diversified tools and channels for configuring and arbitraging Bitcoin. Buying Bitcoin through fully compliant securities markets may become a more prudent choice for listed institutions.