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Rula Khalaf, editor of the Financial Times, picks her favorite stories in this weekly newsletter.
The writer is the former global head of capital markets at Bank of America and is now a managing director at Seda Experts
Bitcoin's stunning rise this year has ignited a dilemma on Wall Street: How far should investment banks go in supporting cryptocurrency-related capital raisings? Recent performances reveal a profound shift in thinking.
Not long ago, major banks kept cryptocurrencies at a distance. The sector had a lusty reputation, and banking leaders were vocal in their disdain. Jamie Dimon, head of JP Morgan, described Bitcoin as a “scam” and a “Ponzi scheme.” Regulatory concerns deepened the lethargy. Cryptocurrency deals have been left to smaller investment banks.
But times have changed. Securities and Exchange Commission consent of Bitcoin exchange-traded funds in January 2024 marked a turning point. Moreover, the election of Donald Trump is likely He preaches A move to a more tolerant Securities and Exchange Commission (SEC) toward cryptocurrencies, in contrast to the skepticism that existed under Chairman Gary Gensler.
As deal sizes swelled, so did the list of underwriters. Barclays and Citigroup led several convertible bond offerings this year to bitcoin investor MicroStrategy. Goldman Sachs has raised money for Applied Digital, a data center operator that caters to bitcoin miners. JPMorgan has issued jumbo convertible bonds to bitcoin mining and infrastructure groups Core Scientific, Mara, and Iren.
As banks debate whether to dive in or back out, the central question is: Can you defend these deals to the hilt, stack the prospectus with risk factors and call them good? Or is being associated with what many consider a highly speculative sector risky?
The answer is not binary. It falls on a scale that reflects each bank's risk tolerance and strategic expectations. It is not clear that all cryptocurrency-related companies should be viewed equally. An established exchange like Coinbase may have a different risk profile than a Bitcoin miner or an investment vehicle like MicroStrategy. Even across similar companies, reputational issues vary.
Consider MicroStrategy and its co-founder Michael Saylor. Without admitting wrongdoing, they both settled accounting fraud allegations from the Securities and Exchange Commission in 2000 and a tax fraud lawsuit filed with the Attorney General of the District of Columbia in June 2024 for large sums of cash. This pattern usually leads to a senior management review about the client's choice. Barclays and Citigroup were clearly comfortable with this association.
If all this sounds familiar, it should be. Take special purpose acquisition companies, or Spacs, for example. Once shunned as gimmicky instruments by some bloated banks, they were embraced by Wall Street during the 2019-2021 boom. But banks retreated rapidly by mid-2022, as reputational concerns emerged. Raising crypto capital has a similar feeling – volatile boundaries as banks chase unexpected fees and market share, while bracing for potential reputational repercussions.
The motivations for these decisions are multifaceted. Legal risks loom. General Counsel lose sleep over questions like: “Are we going to get sued if this is destroyed?” Media scrutiny is equally daunting; No one wants their company to appear in negative headlines.
But risk alone does not dictate behavior. Fees are important. And in Bitcoin's capital markets, it's now big. More than $13 billion in cryptocurrency-linked convertible bonds were issued in 2024, most of them coming in the fourth quarter, according to IFR data. This translates to a graphics range that I estimate to be at least 200mm. MicroStrategy's $21 billion equity offering pays a 2 percent fee to the banks handling the sale. This kind of revenue potential makes reputation-related bookings seem like a luxury.
There is still an unwritten code of respect in banking. Some acts – such as adult entertainment – are avoided even if they are perfectly legal. Cannabis companies are also struggling to convince big-name banks to underwrite their offerings. This reluctance is not rooted in moral outrage. It's pure optics. Bankers know that some companies generate more public heat than they deserve.
However, once a few banks fall out of line, pressure mounts on others to follow suit. It is safe to move as a group; If anything goes wrong, no bank will be spared. The competitive instinct also plays a role. No banker wants to explain to their bosses why they failed to meet their budget targets or fell in the rankings.
In short, Sharing is not a judgment on cryptocurrencies, but rather provides a glimpse into how investment banks weigh the three elements of choosing a deal: risk, reward and reputation. In a constant process of recalibration, senior leaders balance legal exposure, media reaction, regulatory risk, and competitive pressures to determine where the boundaries of “respectable” lie. As Bitcoin moves from the fringes to the mainstream, big banks are slowly stepping into the arena, one deal after another.
