Bank of America, second biggest financial institution in America, admitted in an annual report that cryptocurrencies are a threat to its business model.
The report, which was dated Feb. 22 and filed with the US Securities and Exchange Commission (SEC), listed a range of economic, geopolitical, and operational risks that bank faces as it heads into the new fiscal year. For the first time, rising cryptocurrency adoption made the list.
Here’s three risks regarding cryptocurrencies
International operations are subject to U.S. laws on foreign corrupt practices, the Office of Foreign Assets Control, know-your-customer requirements and anti-money laundering regulations. Emerging technologies, such as cryptocurrencies, could limit bank ability to track the movement of funds. Furthermore, banks are subject to geopolitical risks, including acts or threats of terrorism, and actions taken by the U.S. or other governments in response thereto and/or military conflicts, which could adversely affect business and economic conditions abroad as well as in the U.S.
#2 Financial competition risks
Bank faces significant and increasing competition in the financial services industry.
Bank operates in a highly competitive environment and will continue to experience intense
competition from local and global financial institutions as well as new entrants, in both
domestic and foreign markets. Technological advances and the growth of e-commerce have made it easier for non-depository institutions to offer products and services that traditionally were banking products, and for financial institutions to compete with technology companies in providing electronic and internet-based financial solutions including electronic securities trading, marketplace lending and payment processing.
Further, 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. Increased competition may negatively affect Bank of America earnings by creating pressure to lower prices or credit standards on their products and services requiring additional investment to improve the quality and delivery of their technology and/or reducing bank market share, or affecting the willingness of their clients to do business with Bank of America.
#3 Reputation risk
Bank inability to adapt their products and services to evolving industry standards and consumer preferences could harm banking business.
Banking business model is based on a diversified mix of businesses that provide a broad range of financial products and services, delivered through multiple distribution channels. Bank success depends on ability to adapt products and services to evolving industry
The widespread adoption of new technologies, including internet services, cryptocurrencies and payment systems, could require substantial expenditures to modify or adapt existing products and services.
Bank of America 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 products and services, reducing costs in response to pressures to deliver products and services at lower prices or sufficiently developing and
maintaining loyal customers.
Source: Bank of America Report