On July 22nd, an independent bureau of the United States Treasury, known as Office of the Comptroller of the Currency (OCC), issued a public letter clarifying that national banks and federal savings associations are legally permitted to have custody of cryptocurrency assets.
In other words, US banks have the right to provide storage services for cryptocurrencies.
Fortune reported that the OCC letter, which was addressed to an unnamed US financial institution, “also opens the door for banks to offer more exotic services”, including staking and cryptocurrency lending.
Providing cryptocurrency services is a “modern form of these traditional bank activities.”
Regarding custody, the letter said that “national banks have long provided safekeeping and custody services for a wide variety of customer assets, including both physical objects and electronic assets.”
“[…] The OCC concludes…that providing cryptocurrency custody services, including holding the unique cryptographic keys associated with cryptocurrency, is a modern form of these traditional bank activities.”
The letter also notes that banks could potentially provide services that amount to “more secure storage services compared to existing options,” and that consumers and investment advisors may have a desired to entrust regulated custodians with their assets, rather than an unregulated entity.
The letter was authored by Brian Brooks, a former Coinbase executive who is the current head of the OCC. CoinDesk reported that since Brooks joined the regulatory earlier this summer, he “has already proposed a number of reforms that would benefit crypto companies.”
These reforms include a national payments charter that would let cryptocurrency startups that wish to provide payment services bypass the current patchwork of state-by-state processes for acquiring money transmission licenses.
Letter does not represent policy change, but rather clarification of existing policy
While the announcement does not represent a policy change–rather, a clarification of an existing policy– the news could be quite significant for the cryptocurrency industry.
Previously, a lack of legal clarity around whether or not banks in the United States had the right to hold cryptocurrencies for their customers led banks to avoid Bitcoin and other cryptocurrencies. Fortune reported that this resulted in a de facto ban on banks providing many crypto-related services to their customers.
Now, however, big banks have essentially been given the ‘go-ahead’ to begin offering cryptocurrency custody and other crypto-related services to their users. The question is: will they?
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“I’m looking forward to getting my ass kissed by all the banks now.”
For Barry Silbert, the founder and chief executive of crypto industry investment firm Digital Currency Group, the answer is likely ‘yes.’
“I’m looking forward to getting my ass kissed by all the banks now,” he wrote on Twitter following the letter’s publication.
I'm looking forward to getting my ass kissed by all the banks now
— Barry Silbert (@barrysilbert) July 22, 2020
“Oh what a change from when we first met??!!,” wrote Caitlin Long, founder and chief executive of crypto-friendly bank Avanti Bank and Trust, in reply. “That was 2014, I think…my how the tables have turned.”
After all, the cryptocurrency industry’s market cap currently sits at roughly $285 billion–a nice chunk of change that US banks could potentially be interested in dipping their fingers into.
Some major banks in the United States have already started to provide cryptocurrency-related services to their clientele: JPMorgan Chase, for example, began providing support to Gemini and Coinbase earlier this year.
Still, however, banks in the U.S. maintained a cautionary approach toward serving the crypto industry; cryptocurrency exchanges and other startups seem to be generally regarded as risky for banks’ reputations, as well as a legal headache.
The distinction that banks can offer custody services, however, may be a step toward alleviating some of the banks’ concerns.
What are your thoughts on whether more banks will begin to offer crypto custody services? Tell us in the comments below.