On 22 July, the Office of the Comptroller of the currency (OCC), which is part of the U.S. Department of Treasury announced that national banks and Federal savings institutions have the right to remain crypto-currencies to their customers. What this means and how it will affect cryptosphere.
The decision of the U.S. Department of OSS has attracted the attention of the crypto community. So, in the explanatory letter of the Ministry reported that national banks and now Federal savings Association of the United States entitled «the cryptocurrency to provide custodial services for our clients.» Moreover, as noted in the publication American Banker, the decision of the OSS is more of a recommendation, and other U.S. regulators may restrict banks in providing similar services at its sole discretion.
In published OCC document States that:
- The credit institution received from the Agency a «green light» to self-provision cryptomaterial services and are not obliged to resort to the services of third parties.
- The provision of such services provides that banks «will have access to the unique cryptographic keys that are related to bitcoin storage».
- Cryptomaterial to provide services to legal entities only in case when companies are in full compliance with us law.
- The banks and savings institutions also must comply with all legislation and conduct an audit of cryptocurrency for their origin. All organizations that decide to provide such services will have to be in constant contact with the OCC and to provide any requested American officials information. Moreover, the legal status of cryptocurrency transactions in the US remains «unclear» on 23 July said in his Twitter veteran wall Street analyst, and Kathleen long.
Interestingly, in the OCC document, special attention is paid to the private keys of customers, it is emphasized that there is a risk that «if a third party will have access to the keys, it will be able to transfer their bitcoin to himself.»
Moreover, the document States that although cryptographicly can be conducted without intermediaries, sales of many coins is carried out through centralized exchanges, some of which are in the US received a banking license to operate as trust banks. This means that in the eyes of the SIS, these centralised financial institutions like national banks are the best entities that the owners of cryptocurrencies can trust the keys to your cryptocurrency. So, the document notes that «the quality cryptomaterial services banks and Federal savings institutions on any asset is a priori better than any of the existing alternatives.»
OSS: banks — best custodians of cryptocurrency
Custodial service for the storage of cryptocurrency is considered OSS as an instrument for enhancing already existing services of financial institutions. Moreover, the Department is confident that the banks can provide secure storage for private keys since there is always the risk that the client will lose access to their cryptocurrency or forever lose it. In fact, this situation in cryptosphere is not uncommon. So, access to about 4 billion of existing bitcoins have been lost forever.
In the end, it is expected that individuals (in particular, the 40 million Americans who already own digital assets), and investment companies that manage cryptocurrency clients can trust private keys from their cryptocell financial structures of the United States. Those, in turn, would ensure their security at the expense of «hot» and «cold» storage.
As a result, expect the representatives of the OSS, US banks will be able to consolidate its position not only on the existing financial market, but also to play an increasingly important role in the cryptocurrency.
Banks and the stock market: what is the world experience?
It should be noted that only U.S. financial regulators are trying to integrate banking institutions in cryptosphere to more rigorous monitoring of the industry.
For example, the German regulator BaFin goes to meet cryptobytes, by 1 January 2020 financial organizations to work with cryptocurrencies and provide cryptomaterial services. And in Switzerland’s fifth largest Bank Julius Baer for the first six months of this year received a record profit due to the launch of services on storage of bitcoin. While Julius Baer is not the only Swiss Bank offering cryptomaterial services. So, since September 2019 in this direction works Arab Bank Switzerland and since June of two banks (Bank Maerki Baumann and Incore Bank) has received permission from the Swiss regulator FINMA on the provision cryptomaterial services.
Congress approved the proposal of OSS
The movement towards the introduction of cryptocurrencies in the classical financial sector finds its support including from the American political establishment.
Welcomed the decision by the OSS congressmen Darren Soto and Tom Emmer, both serve on the Board of the U.S. Congress on the blockchain (the Blockchain Congressional Caucus). In working under government contracts company of new York Chainalysis also responded positively to the changes in order to assist cryptomaterial services, Recalling that the trace cryptocurrency transactions in the public blockchain just so you can more effectively identify suspicious transactions, compared with the analysis of «traditional forms of transmission of values.»
The news about the intention of American financial organizations to provide services to representatives of cryptosphere could not be reflected in the stock market. July 26, bitcoin managed to overcome the psychologically important level of $10,000. Against this background, the dynamic growth demonstrated and the altcoins, with the result that the dominant figure of the first cryptocurrency has gone since the year’s high of 67% to below 60%.
The prospects of the industry
Among the players of the stock market just have a lot of assumptions about what will happen next.
So, the head of the company Three Arrows Capital su Zhu suggested that in the near future in the US, the credit organization will start to turn dollar deposits in stabilini, and then send them to the DeFi to generate income. This is stated in the document the OCC, which States that banks can use cryptocurrency to cryptocurrency staking and credit operations. However, it is also noted that these services will be provided only in case «if necessary to strengthen the traditional financial system».
This indicates that the U.S. government does not expect to start the transformation of the banking sector. And without it, even the «regulatory clarity cryptomaterial services,» which enthusiastically says the managing partner of Morgan Creek Capital Anthony Pompliano will not lead to the recognition of the status of bitcoin as a world reserve currency.
Reaping the «digital disability»
On 23 July, the bitcoin enthusiast Pierre Roshar made a bold prediction: the largest US Bank JPMorgan Chase can acquire Coinbase. In turn, the exchange from August 2019 owns the provider cryptomaterial services company Xapo, which keeps 7% of all outstanding bitcoins, worth about $12.7 billion.
Indeed, buying Coinbase, along with Xapo, would be attractive and logical for JPMorgan Chase. The stock market already has players such as Fidelity Digital Assets and Bakkt that have cryptomaterial services being subsidiaries of classic financial institutions and investment Fund Fidelity Investments (total assets under management were nearly $2.5 trillion) and the Intercontinental Exchange, which manages 12 classic exchanges, including the largest stock markets in the world NYSE.
While Fidelity Digital Assets and Bakkt are on the market cryptomaterial services, along with players such as Gemini, Anchorage and BitGo, which has grown and developed along with cryptosphere. Only one BitGo on terms of storage of bitcoins is on the same level as Haro. While BitGo this year bought two more of cryptomnesia — Harbor and Lumina, as indicated on the plans of cryptococcaceae to build a large ecosystem with a wide range of services. The same way goes on, the company Xapo, which in may announced plans to become «digital Bank».
Thus, the output of American banks on the market cryptomaterial services will be associated with a high level of competition with already existing players. That the US is far behind in this matter compared to other States, said Kathleen long. And the result of this competition is almost guaranteed to be not in favor of the classic US banks.
1/ GAME ON! The @USOCC»s announcement that it’s following #Wyoming by allowing national banks to custody #digitalassets is GREAT news for #crypto! Long overdue & hopefully will help the U.S. regain ground it lost to other developed world countries by dilly-dallying for so long. pic.twitter.com/ODYM6bHSVZ
— Caitlin Long 🔑 (@CaitlinLong_) July 23, 2020
The integration of classical Finance to cryptosphere
Jake Czerwinski specializing in cryptocurrency matters, the lawyer from Washington, suggests that although banks are «allowed» to go into the world of cryptocurrency, in the near future they do not intend to. A similar statement was made in the Coin Center.
However, all is not hopeless for us banks. Thus, a sufficiently large number of owners of cryptomery may be interested in the fact that the market cryptomaterial services came under the management of classic financial institutions. So, the explosive growth of shopping providers American banks predicts Kathleen long.
2/ Winners=customers & #crypto VCs. This will spur M&A boom as US banks acquire #digitalasset custodians. Most must sell bc:
a. trust co. charters now obsolete &
b. #Regulations now obsolete 👏
bc @USOCC leapfrogged ’em. Custodians now MUST have a bank charter to be competitive.
— Caitlin Long 🔑 (@CaitlinLong_) July 23, 2020
While it is doubtful that the classic financial institutions, the U.S. can persist in the same form in which they were presented during the last decades. The fact that the output of American banks on the market cryptomaterial services in most cases will look like an attempt to keep up with the times, however, their success in this field is highly questionable in light of the high competition. Thus, it is likely that cryptosphere will increasingly integrate the classical world of Finance in its structure than Vice versa.