U.S. national banks and federal saving associations have received approval for offering crypto custody services to customers. The service mainly targets large-scale institutional investors and not retail investors.
The Office of the Comptroller of the Currency (OCC) said in a letter on Wednesday, July 22, 2020, U.S. Federal banks can now offer crypto custody services. The decision follows last month’s request by the OCC for public input on the matter. In the letter, Senior Deputy Comptroller and Senior Counsel Jonathan Gould said national banks could hold the unique keys needed for a cryptocurrency wallet. This means national banks can now hold digital assets on behalf of their clients.
Enhance The Market’s Accessibility
This is a gigantic step in developing the cryptocurrency industry since cryptocurrency firms have only provided custody service. Firms offering custody services needed a state license to hold cryptocurrency funds on behalf of institutional clients. With banks entering the market, large regulated institutions will provide the much-needed service and enhance the market’s accessibility.
According to the OCC, banks offering crypto storage is beneficial for market players like investment advisers who prefer third-party custodianship by law. The OCC’s decision to let banks offer crypto custody follows the agency’s involvement in safeguarding physical assets. It’s noteworthy that the new initiative comes under the leadership of Brian Brooks, who formerly worked for Coinbase. Brooks, who is the Acting Comptroller of the Currency, remarked:
“From safe-deposit boxes to virtual vaults, we must ensure banks can meet the financial services needs of their customers today. 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.”
Opt For Managed Security
According to the OCC, there is a “growing demand for safe places” where large-scale investors can store their cryptocurrency keys. Crypto custodians offer institutional-grade security and protection for large amounts of crypto assets. While retail crypto investors hold their cryptocurrency in non-custodial wallets, institutional investors need complicated storage settings.
That OCC noted that investment advisors might need to directly access their customers’ crypto assets making a custodial bank the more sensible alternative. Also, institutional investors will opt for managed security instead of offline “cold storage.” Blockchain technology and cryptocurrencies are spreading towards the mainstream financial world.
As investors are choose how to secure their coins, robust storage for crypto will determine the success or otherwise of institutional adoption. Some companies are developing technology that will allow efficient trading and staking right from cold wallets.