Bitcoin and other cryptocurrencies are looking shakier from a regulatory standpoint on reports that India’s central bank is cracking down. But Wall Street still sees plenty of profit for exchanges like
and others in the crypto economy as “staking” digital tokens opens up new revenue streams.
The latest regulatory hurdle for crypto appears to be India, where the Reserve Bank of India, or RBI, is “informally asking” banks to avoid digital currency transactions, Reuters reports.
Indian banks have been in a quandary over crypto; the RBI banned crypto transactions in 2018, but the Indian Supreme Court ruled against the ban in March 2020. Financial regulators in India may now be seeking alternate means to quash the crypto market, forcing exchanges to use other payment gateways and processors.
India’s crackdown follows one in China, where much of Bitcoin is mined, or processed. Financial authorities in May ordered a “crackdown on Bitcoin mining and trading behavior,” aiming to maintain financial market stability and “severely punish” illegal financial activities. That has triggered an exodus of mining operations out of the country.
Yet Wall Street still sees large and rising profits in the crypto economy. J.P. Morgan, for instance, issued a note on Wednesday outlining a $40 billion revenue opportunity in crypto “staking,” a method of validating blockchain transactions that generates income for exchanges and holders of a crypto token.
Staking is now a $9 billion business, according to J.P. Morgan and will grow to $20 billion as the two large Ethereum networks complete their merger later this year, switching to a “proof of stake” protocol from “proof of work.” The overall staking market will hit $40 billion by 2025, the Wall Street firm estimates.
“We think staking will make the cryptocurrency marketplace increasingly attractive relative to other asset classes, yield-generating or not,” J.P. Morgan’s Kenneth Worthington wrote in a note.
Exchanges stand to benefit by earning fees and commissions from customers that stake their tokens.
(ticker: COIN) could generate $200 million from staking in 2022, up from about $10 million in 2020, Worthington estimates. Staking could hit a $500 million annual run-rate for Coinbase by the end of 2025, he forecasts.
Proof-of-stake is also more energy efficient than proof-of-work protocols and could help reduce the steep energy-consumption and environmental toll of…