The news: Bank of America (BofA) is recommending that clients allocate up to 4% of their portfolios to crypto, a more crypto-forward stance than previously and one that clicks with demographic trends.

The change would allow advisors for the private bank and Merrill Edge, the retail brokerage, to recommend crypto products. Beforehand, clients could only access crypto products by request.

How it works: Crypto-based investments will become easily available through BofAa's brokerage services, like traditional investments. Crypto exchange traded funds (ETFs) give investors crypto exposure through the same vehicles used to trade baskets of stocks and funds, which are distributed through traditional brokerage offerings. What’s inside depends on the type. Early US crypto ETFs used crypto futures. In 2024, the Securities and Exchange Commission (SEC)—which has continued to broaden the regulatory approval of crypto-based investments—approved spot Bitcoin ETFs.

Trendspotting: BofA’s decision is timely. Gen Zers favor alternative assets like crypto and private credit, and firms need to make those available lest they be outcompeted by fintechs that enable those investments: Gen Zers are more likely to own crypto than to have a 401(k), and 65% plan to invest more in crypto. Crypto availability in the context of brokerage and wealth management is crucial to banks’ and brokerage firms’ competitiveness in the Great Wealth Transfer.

Our take: What seems like a minor change to investment policies further legitimizes crypto as a mainstream asset and will have a long-term positive impact for BofA.

The bank is less likely to lose customers to fintechs like Robinhood or SoFi for crypto trading when it offers some of the same investment exposure. Other banks should be prepared to do the same: Crypto as an investment is no longer niche, and institutions that don’t adapt will be left behind.