WHAT WILL HAPPEN IN COMMODITIES WHEN BANKS CUSTODY CRYPTO?

The above question sparked a debate filled with bothsensible insights and some wild theories over lunch overlooking Lake Genevaduring my European tour last month.

As a former commodities player well-versed in trade finance,and now a crypto native since my baptism in 2016, one thing is clear: whilethese mega-whale banks have secretly been in the crypto space for a while (whenyou know, you know), their official entrance into the custody space seems to begetting baptized by Cardinal Trump and his team of disciples.

This is a thought I haven’t seen documented anywhere, so I’mgoing to attempt to structure a view—one I hope to revisit in 18-24 months tosee where I was right and where I was wrong.

Here’s my theory:

1. CRYPTO WILL BE USED AS COLLATERAL FOR COMMODITYFINANCING

Institutional clients and individual traders could useBitcoin, Ethereum, or tokenized assets as collateral for loans, similar totraditional assets like gold or treasury bonds. In fact, I honestly don’t seewhy we would need to issue a bond anymore when we could just tokenize the assetwith an expiry.

• THE     END OF LETTERS OF CREDIT IN COMMODITIES – Traders could leverage their     crypto holdings for short-term financing of physical trades, which is     traditionally done with letters of credit or bank guarantees.
• A     MORE LIQUID AND DECENTRALIZED FINANCING ECOSYSTEM – This shift could     open up opportunities for ‘chosen’ retail investors who normally wouldn’t     have access to this industry.

2. BANKS WILL TOKENIZE COMMODITY MARKETS

• Banks     custodying crypto could extend into managing tokenized commodities such as     gold-backed tokens, oil tokens, or carbon credit tokens. But personally, I     see more value in tokenizing refineries, ships, and mines.
• This     could enable faster and more transparent settlement of commodity trades,     reducing counterparty risk and improving capital efficiency.

3. INCREASED LIQUIDITY IN COMMODITY MARKETS

• If     banks integrate crypto custody services with lending and trading,     commodities could be fractionalized and traded 24/7 on blockchain networks     globally, reaching a retail market that was previously inaccessible.
• More     liquidity could lead to tighter spreads and lower volatility in commodity     prices—something that market desperately needs.

4. TRADE FINANCE BACKED CRYPTO – THE END OF THE LC

• Traditional     trade finance models, such as letters of credit and supply chain     financing, could evolve into crypto-backed financing models.
• Smart     contracts and digital assets could automate collateral verification,     making financing faster, cheaper, and more accessible.
• This     could be a game-changer for small and medium-sized commodity traders,     reducing their dependence on large banks.

5. STABLECOINS IN COMMODITY SETTLEMENTS

• With     banks holding crypto, stablecoins (USDT, USDC, or bank-issued stablecoins)     could become an alternative for commodity trade settlements.

6. OLD-SCHOOL BANKS VS. DEFI LENDING PROTOCOLSBanks entering crypto custody might launch their own lendingproducts, competing with DeFi protocols like Aave or MakerDAO—thus killing offmany projects in their wake.

• This     could attract institutional clients who want regulated, insured     crypto-backed loans instead of decentralized solutions (which is exactly     how banks will sell it to them).
• Commodity     firms might prefer bank-backed crypto loans due to compliance and     counterparty risk management—finally giving banks full transparency into     corruption within this industry.

7. DIGITAL COMMODITIES WILL BE BIGGER THAN OIL AND DATACOMBINED

• Large     commodity firms and sovereign wealth funds WILL diversify their     reserves with crypto or tokenized commodities—I 100% believe in this.
• With     banks providing custody, institutional investors might feel more     comfortable holding Bitcoin as a hedge, similar to gold. But I envisage a     basket of indexes.
• This     could lead to new financial products, such as commodity-crypto hybrid     ETFs.

8. CRYPTO DERIVATIVES: A WHEN, NOT A HOW

• Banks     could introduce crypto-based derivatives for commodity hedging.
• For     example, a coffee trader might hedge currency exposure using a     Bitcoin-based futures contract instead of traditional forex hedges.
• This     could make risk management more dynamic and globally accessible.

9. CRYPTO COMPLIANCE WILL BE THE BIGGEST HIRING BOOM OF2026

• If     banks custody crypto, government regulations will likely increase,     bringing greater institutional control.
• This     could lead to more transparency and investor protection but also reduce     some benefits of decentralized finance.
• Institutional     clients might welcome regulation, while retail crypto users might see it     as a loss of decentralization.

10. COMMODITIES WILL TAKE CRYPTO TO NEW HEIGHTSCommodities and crypto share store-of-value characteristics,making them a natural bridge between traditional finance (TradFi) and digitalassets.

• Banks     could develop hybrid financial instruments that blend commodities, fiat,     and crypto into structured products.
• This     could create a new financial ecosystem where physical and digital assets     coexist in financing and risk management.

I’M NOT MAD, NOR A DREAMER. I’M MACRO-MINDED, FULLYVERSED IN BOTH THE PAST BEHAVIORS OF COMMODITIES AND THE CRYPTO PROJECTION OF OUR FUTURE.

‍From a commodity financing perspective, bank custody ofcrypto could: ✅ Improve access to trade finance for small traders
✅Introduce new collateral options for commodity-backed loans
✅Speed up and digitize commodity settlements via tokenization
✅Create hybrid financial instruments that blend commodities and cryptoHowever, this shift would also come with regulatorychallenges, liquidity risks, and potential conflicts with decentralized finance(DeFi).Would you like me to refine this into an op-ed style articlefor publication? 🚀#CryptoCustody, #BanksAndCrypto, #CommodityFinance,#Tokenization, #CryptoCollateral, #TradeFinance, #Stablecoins, #DigitalAssets,#CryptoBanking, #Bitcoin, #Ethereum, #DeFi, #InstitutionalCrypto,#CryptoRegulations, #SmartContracts, #CryptoLending, #CommodityMarkets,#BlockchainFinance, #CryptoLiquidity, #TokenizedAssets, #CryptoDerivatives,#StablecoinAdoption, #DigitalCommodities, #CryptoHedging, #HybridFinance,#CryptoETF, #CryptoCompliance, #BankingRevolution, #MacroFinance, #CryptoFuture