Cryptocurrencies get three mentions by Bank of America. How significant is that?

Bank of America’s 10-K report, filed February 22 with the Securities & Exchange Commission, is being touted by cryptocurrency backers as a major step in broader acceptance of bitcoin and other tokens.

That’s one way to look at it. But some explanation is in order. 

There are three references in the 10-K to the term “cryptocurrency.” And it is true that the mention of cryptocurrencies by Bank of America as a possibly disruptive force is notable. It’s a first, and other banks’ 10-Ks will certainly be scrutinized now during filing season to see if they’ve made the same declaration as BOA.

It could also be noted that citing cryptocurrencies as a potentially disruptive force for BOA is just adding to a long list of possible “bad things” that could happen to a bank, lists that are in every 10-K and which if read all at once seem apocalyptic. (“A failure in or breach of our operational or security systems or infrastructure, or those of third parties, could disrupt our businesses, and adversely impact our results of operations, liquidity and financial condition, as well as cause legal or reputational harm” is in there, and the language is typical of many other sections.)

Still, cryptocurrencies wasn’t on earlier lists; now it is. A search of the prior year’s 10-K, summing up the bank’s performance in 2016, has a lengthy list of potential risks for the company, just like this year’s report. The difference is that the prior year’s report does not have the word “crypto” at all. 

Promoters of cryptocurrencies are attempting to use them as a tool to build new blockchain protocols for the transportation industry. We have identified almost two dozen of them. 

The risks, in BOA’s words

In this year’s 10-K, BOA said the following: 

–“Emerging technologies, such as cryptocurrencies, could limit our ability to track the movement of funds. Our ability to comply with (banking) laws is dependent on our ability to improve detection and reporting capabilities and reduce variation in control processes and oversight accountability.” That is more of a regulatory and compliance issue, rather than a loss of market share issue.

–“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. 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.”

–(In the middle of a lengthy list of potential risks from clients choosing financial services other than offered by a traditional bank): “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.”

So that’s it. The interpretations of whether this is significant would be a) it isn’t a big deal, because it only got mentioned three times among an enormous doomsday-like sea of other potential risks to the company b) it’s a very big deal, because for the first time, cryptocurrencies were mentioned as a possible risk to one of the largest banks in the world.

One final point: cryptocurrencies were mentioned. Bitcoin was not.