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FT editor Roula Khalaf has chosen her favorite stories in this weekly newsletter.
The author is the former Global Head of Equity Capital Markets at Bank of America and currently a Managing Director at Seda Expert.
Bitcoin’s spectacular rally this year has reignited the dilemma on Wall Street. To what extent should investment banks support cryptocurrency-related financing? Recent products reveal a major shift in thinking.
Not so long ago, big banks kept cryptocurrencies out of reach. The sector had a risqué reputation, and bank executives were vocal about their disdain. JPMorgan CEO Jamie Dimon has slammed Bitcoin, calling it a “scam” and a “pyramid scheme.” Concerns over regulations have deepened. Cryptocurrency trading has been left to small investment banks.
But times have changed. The turning point came in January 2024 when the Securities and Exchange Commission approved Bitcoin exchange-traded funds. Additionally, Donald Trump’s election will likely herald a shift towards a more crypto-friendly SEC, in contrast to the skepticism under Chairman Gary Gensler.
As the deal size grew, so did the roster of underwriters. Barclays and Citigroup led multiple convertible bond issuances for Bitcoin investor MicroStrategy this year. Goldman Sachs has raised funding for Applied Digital, a data center operator that provides services to Bitcoin miners. JP Morgan has underwritten a large convertible note for Bitcoin mining and infrastructure group Core Scientific, Mara and Airen.
As banks debate whether to jump headlong into this space or hold back, the central question is whether they should be able to lawyer up these deals through to the end, pile up the risk factors in the prospectus, and decide if it’s good. It’s about being able to judge. Or is it too risky to get involved in what many consider a highly speculative sector?
The answer is not binary. This lies on a spectrum that reflects each bank’s risk tolerance and strategic outlook. And it’s not clear whether all crypto companies should be viewed equally. Established exchanges like Coinbase may have a different risk profile than Bitcoin miners or investment vehicles like MicroStrategy. Even similar companies have different reputational issues.
Consider MicroStrategy and its co-founder Michael Saylor. Both men denied wrongdoing and settled accounting fraud charges from the SEC in 2000 and a huge tax fraud lawsuit with the District of Columbia attorney general in June 2024. Such a pattern typically triggers a senior management review of customer selection. Clearly, Barclays and Citigroup were happy with the association.
All of this may sound familiar, and it should be. Take special acquisition vehicles, or Spacs, as an example. Once shunned by some bulge bracket banks as gimmicky vehicles, they were embraced by Wall Street during the 2019-2021 boom. However, banks quickly exited by mid-2022 as reputational concerns surfaced. Cryptocurrency funding has a similar feel. It’s a volatile frontier as banks chase windfall fees and market share while bracing for potential reputational headwinds.
The drivers of these decisions are multifaceted. Legal risks loom large. General counsel loses sleep over questions like, “If this problem worsens, will we sue?” Media surveillance is equally frightening. No one wants their company to be in negative headlines.
However, risk is not the only driver of behavior. Price is important. And in the Bitcoin capital market, they are now quite large. According to IFR data, more than $13 billion of crypto-related convertible debt was issued in 2024, most of it in the last quarter. I estimate that translates into a fee pool of at least $200 million. And MicroStrategy’s $21 billion stock offering is paying a 2% commission to banks handling the sale. This kind of potential revenue makes reputable bookings feel like a luxury.
There remains an unspoken norm of social status in the banking industry. Certain businesses, such as adult entertainment, are avoided even if they are completely legal. Cannabis companies are also having trouble convincing big banks to underwrite their products. This resistance is not rooted in moral outrage. It’s pure optics. Bankers know that certain businesses attract more public heat than they’re worth.
But once a few banks break the rankings, pressure increases for others to follow suit. It is safer to travel in groups. If something goes wrong, no bank will be caught out. Competitive instincts also come into play. No banker wants to explain to their boss why they missed their budget goals or fell behind.
In other words, participation is not a verdict on cryptocurrencies, but a glimpse into how investment banks weigh the three R’s of trade selection: risk, reward, and reputation. In an ongoing process of recalibration, senior leaders are balancing legal exposure, media reaction, regulatory risk, and competitive pressures to determine where the boundaries of “respectability” lie. As Bitcoin moves from the fringes to the mainstream, major banks are moving further into the space, one transaction at a time.
