The Office of the Comptroller of the Currency (OCC), a United States government agency focused on regulating the national banking system, authorized on Wednesday that U.S. banks and federal savings associations can provide custodial services for crypto assets.
“From safe-deposit boxes to virtual vaults, we must ensure banks can meet the financial services needs of their customers today,” said Acting Comptroller of the Currency Brian P. Brooks.
Safeguarding assets is one of the most fundamental and basic services that banks provide, which has historically included both physical and digital/electronic assets (like public equities).
Now, with today’s approval from the OCC, US banks of all sizes can set up shop for millions of customers to safely hold their crypto assets.
This is a massive win for crypto. While centralized banking goes against the notion of DeFi and the ethos of crypto at large, federal approval for crypto custody solutions opens the floodgates for adoption by solving one of the biggest issues of our nascent industry – how to safely store and manage crypto holdings.
In the lens of global adoption, it’s unreasonable to assume that the average person will ever understand how to properly safeguard their own private keys. And that’s okay. The important piece to the open finance movement is to always have the ability to opt-out of the system and self-custody your digital wealth. Because that’s impossible today.
You can’t withdraw your TSLA stock and hold the stock yourself. Instead, the asset siloed away and entirely reliant on a financial institution for it to exist in your possession. It’s completely centralized and we have no way of opting out.
But with Bitcoin, Ethereum and other decentralized networks, people always retain the option to take full control of their wealth. These networks create a digital equivalent of putting cash under your mattress or digging a hole in your backyard to hide your gold.
However, people generally like to have their wealth held in a bank. It brings peace of mind. It relieves the many anxieties associated with holding private keys – house fires, robberies, misplacement and any of the other risks associated with being responsible for holding onto your own wealth (and protecting it).
So at the end of the day, while having big banks taking control of your money is not in line with the long-term vision of crypto, it’s a critical step in improving accessibility.
And it looks like it’s starting to reflect in the price as well. Since the announcement was released, the price of ETH has spiked upwards to levels not seen since pre-Black Thursday while BTC has also responded positively as it closes in on $10,000. ETH/BTC is also closing in on a 2020 high of 0.028.
We can imagine that the coming months and years we’ll see major US banks begin offering services to their customers. There’s millions of potential customers in the US representing billions of dollars in capital. It’s an obvious business move.
It’s likely that the recent regulatory approval will lead to a suite of acquisitions of crypto custody solutions from big banks. Coinbase Custody, BitGo, Paxos and others may have some offers lined up by the end of the year. But that’s just speculation.
If anything is for sure, the approval of crypto assets in the legacy financial system is the cherry-on-top for an impending bull run.
The one that DeFi is already kicking into gear.