Don’t Expect Banks to Jump on the Crypto Custody
July 24, 2020 @ 10:02 +03:00
Banks can now offer cryptocurrency and digital asset custody to their clients, but what does this really mean? As you may know, the Office of the Comptroller of the Currency (OCC) announced Wednesday that nationally chartered banks in the U.S. can now jump into the crypto custody arena. There are plenty of opinions about what impact this will have on the industry, and many of them are at odds.
Some feel this is the beginning of a new era for the industry where banks will be able to offer complimentary digital asset services attractive to sophisticated investors; or, even more optimistically, that a Bitcoin ETF is more likely to be approved. Others have lamented that banks will audit and tax every penny, or, even worse, that they will readily agree to help the federal government seize coins in the future.
Here’s the thing. Traditional financial institutions, banks included, move slowly. Most make turtles look like they’re in a hurry. So, don’t expect any to announce their brand new custody platform immediately, if at all.
According to a recent Fidelity survey, only about a third of all these firms even own crypto.
Think about that for a second. Many investors in this space are here because they are weary of being exposed to the systemic risk that having digital assets custodied in a traditional financial institution could create. They are hedging against the very network that’s trying to encroach on Bitcoin.
THE BULK OF BANKS AND OTHER SOPHISTICATED PLAYERS IN THE OLD SCHOOL MARKETS DON’T KNOW MUCH ABOUT OUR INDUSTRY.
Given this unusual (and vocal) segment of our industry, banks may not have quite the opportunity they think they do, and a significant share of crypto asset traders and investors may avoid them altogether and stick with crypto native firms that are somewhat insulated from the potential problems of a Northern Trust or a State Street, both of which are large traditional custodians that took TARP bailout funds during the Great Recession.
Once all the headlines surrounding this announcement fade away, what will we be left with? Probably not many new custodial entrants from this regulatory approval in the short term, but the bright hope that the onlookers will see the acknowledgement from our government that crypto is real, at least real enough for the house that Morgan built to be allowed to do business with it.
Don’t Expect Banks to Jump on the OCC Crypto Custody News, CoinDesk, Jul 24