The State Comptroller’s Office, a division of the U.S. Treasury Department that oversees the nation’s banking services, released an explanatory message on July 22, stating that locally-leased banks are permitted to provide cryptocurrency services to their clients spanning the storage of cryptocurrency-related keys.
In its message, OCC recognizes the current need of banks and other financial services providers to take advantage of blockchain technology and provide related services to its clients. In addition to national banks, this permission extends to government banks and loan / savings societies, also known as “savings”.
What will change?
Importantly, the move, along with news of the Fed’s anticipated stimulus of $ 2 trillion, pushed the price of Bitcoin (BTC) to over $ 11,000. However, the result may not be just short-lived. Highlighting the importance of the move, Hongfang, CEO of OKCoin – a global crypto exchange – told Cointelegraph:
“OCC has made an important milestone by allowing conventional banks to provide custody services that will be applied to cryptography, thereby strengthening the public financial system and expanding financial inclusion. While the general message did not introduce new regulations, it did add a much-needed clarification regarding national banks providing cryptocurrency services. ”
According to Fang, the latest decision is heavily influenced by the currency auditor, Brian Brooks – a former statutory official for the U.S.-based Coinbase cryptocurrency exchange platform. His experience in legal, compliance, and government-related jobs has provided him with a greater understanding of the custodial aspects of cryptocurrencies in the American financial system: “The safety-focused notes by Acting Comptroller Brian Brooks will help the United States remain a leader in the global financial landscape” .
Impact on institutional investors
Such a development has a major impact on institutional investors who often question new industries such as cryptography. It is a step towards crypto assets being considered a legitimate asset class by major banks, payment companies and clearing agencies. Sam Weiner, co-chair of Crypto Asset Services at KPMG, discussed the impact of this announcement on institutional investors with Cointelegraph, alluding to the nature of trustees:
“Custody is a fee-based business and the organizational support behind a new fee-based business makes it more attractive. Institutional coding markets continue to grow in size, maturity and sophistication, which drives the need for preservation services. The market uncertainty increases the appeal of new fee-based products. “.
Leading global banks in the U.S. already have strong infrastructure and strong platforms for traditional preservation work, and coding can share this rule according to Wyner, who also added: “Building coding infrastructure now will enable banks to support tokens assets in the future.”
Given the opportunities for custodial fees that this move brings, institutional actors must be the most beneficiaries. The minimal impact of this increase in interest will inevitably affect individual investors, enabling them to increase the proportion of crypto assets in their individual portfolios. Here, Fang said: “I look forward to seeing more banks become more open to encryption, with better banking channels, increased public awareness, as well as more organizational clarity. A better user experience ultimately wins.”
The largest institutional crypto exchange, Bakkt, has broken daily BTC records twice twice in the past two days, and the volume of BTC options has reached an all-time high in Deribit that could indicate signs of this interest. However, a clear direction remains to be determined before a judgment is passed.
An opportunity for banks?
Earlier this year, 40 German banks reached out to regulators, expressing interest in custodian licenses for crypto assets, and Germany’s Federal Financial Supervisory Authority, or BaFin, issued guidelines in March saying that companies may only call trustees if they can access To private keys for customers, which may eliminate service providers who see encrypted keys. Despite this interest, the CEO of Crypto Storage AG said that the company found it extremely difficult to even open a bank account in the country due to banks’ lack of understanding of the nature of the crypto industry.
Likewise in the United States, it is very likely that banks will not immediately sink in this opportunity, because technically speaking, banks have never been prevented from keeping crypto assets, and there has been no transparency about the risks they may entail. From this perspective, this development can only be considered as an illustration of the OCC.