With crypto platform ‘built and ready,’ PNC waits on its regulators

Once regulators provide more clarity, PNC Financial Services Group is ready to start allowing customers to trade cryptocurrencies.

“Client demand is there. Our ability to offer it in a clean and simple and easy form on mobile is built and ready,” CEO Bill Demchak said Tuesday at the Barclays Global Financial Services Virtual Conference. “We’re just answering a few questions.”

The biggest sticking point appears to be which business unit the bank can use to trade crypto legally. Demchak posed the question of whether regulators would classify stablecoins, which are pegged to the U.S. dollar, as a security. If so, they would have to be traded out of the bank’s brokerage unit, he said. Otherwise, there could be another avenue within the bank to facilitate the trades.

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“We need a little bit of guidance, as does the industry, on exactly where they should sit and how we should think about it,” Demchak said.

The $552.6 billion-asset bank has disclosed that it has held discussions with Coinbase, a company that allows customers to trade digital currencies and went public earlier this year.

Banks have been circling an estimated $2 trillion market for cryptocurrencies, especially as loan growth remains constrained and executives are looking for new ways to build fee income.

In August, Securities and Exchange Commission Chair Gary Gensler said that the agency was eager to work with Congress to close regulatory gaps in the crypto field. Federal Reserve Gov. Lael Brainard warned in May of the growing number of stablecoins entering the market and made the case that a central bank-issued digital currency would provide a safer option.

Fitch Ratings said in a note to clients Tuesday that cryptocurrencies will become more ingrained in the U.S. financial system, but more regulatory answers are needed before banks can become heavily involved.

“Lack of legislation or clear regulatory guidance has made U.S. banks cautious to enter the digital asset space,” Fitch analysts wrote. “Regulatory developments are and will continue to be crucial considerations when assessing the market’s growth potential and credit implications for banks entering the space.”

Demchak said there could be opportunities for growth outside of crypto, raising the possibility of acquiring another bank after the Pittsburgh bank’s merger with BBVA’s U.S. operation. But he noted, as he did earlier in the summer, that a Biden administration executive order meant to crack down on consolidation could make such deals more difficult.

“Inside of that tough environment, I continue to think smaller institutions will struggle to be relevant and they will be for sale,” Demchak said.