By
Tolu Ajiboye
May 6th, 2024
New services offered by banks can become a big boost for bridging the gap between the traditional and crypto markets.
In a big development for the crypto community, the U.S. regulators have given a green light to nationalized banks and federal saving institutions to provide crypto custodial services to their customers.
On Wednesday, July 22, the U.S. Office of the Comptroller of the Currency (OCC) announced this pathbreaking decision. This is also big news for the crypto community as it shows the positive approach of the regulators towards public cryptocurrencies.
Previously, only big exchanges and platforms like Coinbase having a state license were offering crypto custodial services. This decision further allows more players to enter and bring robust infrastructure to the crypto space. Now other regulated financial companies that offer safekeeping services can easily enter the market.
Brian Brooks, the acting comptroller of the OCC said:
“This opinion clarifies that banks can continue satisfying their customers’ needs for safeguarding their most valuable assets, which today for tens of millions of Americans includes cryptocurrency.”
The letter from the OCC further states that banks “may offer more secure storage services compared to existing options”. Additionally, both customers and investment advisors can use regulated custodians to ensure they don’t lose their private keys.
The OCC also mentioned that providing cryptocurrency custodial services would severely differ from offering other custodial services. This is because cryptocurrencies required digital wallets for storage, Now since they completely operate on the blockchain, there’s no physical possession of crypto. The letter noted:
“The OCC recognizes that, as the financial markets become increasingly technological, there will likely be increasing need for banks and other service providers to leverage new technology and innovative ways to provide traditional services on behalf of customers”.
Banks Should Ensure Safe Crypto Asset Storage and Risk Management Practices
In the letter, OCC also mentioned that banks should properly consider the implementation of secure asset storage and management practices. The regulator also stated that institutions looking to offer custodial services should “develop and implement those activities consistent with sound risk management practices and align them with the bank’s overall business plans and strategies as set forth in OCC guidance.”
The letter notes that banks can provide both fiduciary and non-fiduciary custodial services. The letter notes that the banks and other regulated financial institutions can hold a variety of assets as custodians. This includes assets that are unique and hard to value. The OCC also noted:
“Providing custody services for cryptocurrency falls within these longstanding authorities to engage in safekeeping and custody activities. As discussed below, this is a permissible form of a traditional banking activity that national banks are authorized to perform via electronic means”.
Well, this is a great development towards bridging the gap between the traditional financial markets and the crypto markets. It will also initiate a big momentum of bringing digital currencies to the mainstream financial markets.
In another development, the U.S. Senate is also working on Digital Dollar to combat China. A panel is going to discuss the inclusion of Digital Dollar to counter China’s development with Digital Yuan.