While some banks are beginning to embrace cryptocurrency and other innovations in the decentralized finance space, financial institutions should be wary of four “disintermediation risks,” meaning the risk of removing financial institutions as a middle man, of emerging technologies.

The $653.6 billion Canadian Imperial Bank of Commerce (CIBC) released in its annual report on Thursday an outline of the disintermediation risks posed by technology trends like crypto for banks and financial institutions:

Risk No. 1: The disruptive power of automation and artificial intelligence present both challenges and opportunities.

“Advances in artificial intelligence (AI) and automation also have the potential to transform business models over time, including the delivery of financial services advice through automated processes,” according to the report. “CIBC is maturing its AI capabilities with a focus on maintaining customer confidence and trust by building AI practices that apply principles such as fairness, ethics, transparency and security.”

Risk No. 2: Fintechs and leading technology players present “competitive pressure,” CIBC noted.

Risk No. 3: Blockchain technology presents a potential risk since it “enables parties to transact with one another without the need for centralized third-party intermediaries such as banks,” the report stated.

Risk No. 4: “Cryptocurrencies, such as Bitcoin, are a specific application of blockchain with the potential for disintermediation,” the report stated. It saw a potential threat in cryptocurrencies creating investment services and products that would otherwise be provided by financial institutions.

That risk, however, is somewhat offset, CIBC conceded.

“However, widespread adoption as a substitute for government-issued currency does not appear to be a near-term prospect as Central Banks around the world explore Central Bank Digital Currencies,” the report stated.

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