In December, PNC Bank (PNC +0.19%) became the first major bank to offer Bitcoin (BTC 0.11%) services to eligible clients. The new spot Bitcoin trading facilities will initially only be available to high-net-worth clients of PNC Private Bank. They will be able to use the bank's platform to buy, sell, and hold Bitcoin.
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The bank says it plans to expand the service to more customers in the future. Created in partnership with Coinbase (COIN 1.18%), the deal means PNC Bank will also provide banking services to the crypto exchange.
FDIC insurance would not apply to Bitcoin purchased through a bank
If the cryptocurrency industry is to grow, adoption will be crucial. And having a major bank offer Bitcoin to its clients is another step on that path. However, while significant, these are small steps in a very long journey. The announcement didn't have a big impact on Bitcoin's price, which has been struggling to hold its head above $90,000 for much of the past month.
CRYPTO: BTC
Key Data Points
The one thing investors need to know is that Bitcoin bought through a bank won't be covered by FDIC insurance. Cash held in an FDIC-insured bank is protected against bank failure for up to $250,000 per depositor per account category. That does not apply to cryptocurrency -- even if it is bought with an insured bank.
PNC Bank Bitcoin purchases are part of Coinbase's crypto-as-a-service, which means the popular crypto exchange will take care of the custody. However, customers may have to pay custody fees, which haven't been disclosed.
If those fees are comparable to the expense ratios on a crypto ETF, consider the pros and cons of both routes. No insurance will protect you against crypto's price swings. However, if you buy a spot Bitcoin ETF through your brokerage, at least SIPC insurance would kick in if the institution fails.
PNC Bank could be the first of several to offer crypto services, which could help crypto go mainstream. Just don't assume you'll get more consumer protection by buying Bitcoin through a bank rather than a crypto exchange.
