Bank of America and crypto concerns
In one what may be considered as the first time that a large financial institution has gone on record to claim that cryptocurrencies may be a threat to their business, Bank of America made several claims to this fact in an official filing with the Securities Exchange Commission.
Bank of America recently filed a 10-K as part of its yearly filing procedures with the US SEC. In the report, the bank noted that they do acknowledge cryptocurrencies as a threat to their business. This notification to the SEC and to the investors that will be reading this filing is significant because it may mark the first time that a large financial institution has gone on record to let their shareholders know that the emergence of cryptocurrencies might be a matter of concern as the industry progresses.
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The Bank of America 10-K
Publicly traded companies like Bank of America are required by the SEC to file reports like the 10-K form on a yearly basis to provide more transparency and comprehensive information that pertains to the financial performance of the entity in question.
The risks addressed in a 10-K form may apply to the firm that is doing the filing, or it may be a risk that is more systemic, a risk that affects an entire economy. These risks are presented are a part of overall due diligence, thus providing prudent investors with necessary facts to make their dynamic investing decisions.
The report makes mention of cryptocurrencies in the risk that it could pose a problem in effectively tracking money flows and adhering to anti-money laundering and knowing your customer laws.
“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.”
Furthermore, the writers of the document state that they see a risk of cryptocurrencies under their “Our ability to adapt our products and services to evolving industry standards and consumer preferences could harm our business” section.
Bank of America states that their business model consists of a diverse array of businesses that provide financial products that range in nature and service. They note that their success is contingent on their ability to adapt their products to evolving industry practices. The institution is seeing a rise in pressure by competitors who are seeking to undercut their prices, another factor which may harm their business. They go on to note that the competitive landscape may be impacted by the growth of non-depository institutions that offer products that were traditionally banking products as well as new innovative products. This increase in competition can “reduce their net interest margin and revenues from their fee-based products and services.”
They believe that shifting toward new methods of payment processing, such as incorporating cryptocurrencies and relevant applications as a part of their business may have an initial increased capital outlay.
“In addition, 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 as we grow and develop our internet banking and mobile banking channel strategies in addition to remote connectivity solutions.”
Another significant point raised by the bank was the fact that they may not be able to successfully create or introduce the new products that may be in demand to the marketplace, thus causing them issues in their ongoing business.
“We might not be successful in developing or introducing new products and services, integrating new products or services into our existing offerings, 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.”
Bank of America does not want to go the way of Blockbuster, where Netflix and other services followed, to put Blockbuster out of business. Adapt or die is the name of the game in business and Bank of America is at least acknowledging that they need to look closely at cryptocurrencies as they progress.