'Cryptocurrency Custody' at Banks Continues to Grow as U.S. Jumps on Board

24 Jul, 2020
'Cryptocurrency Custody' at Banks Continues to Grow as U.S. Jumps on Board

Here’s yet another sign that the international financial world is ready to fully embrace digital assets: Federally chartered banks and financial institutions in the U.S. have been given the green light to offer “cryptocurrency custodial services.”

In an interpretive letter from the U.S. Office of the Comptroller of the Currency (OCC), Acting Comptroller Brian P. Brooks stated that offering cryptocurrency custody services is “a modern form of traditional bank activities related to custody services.”

"From safe-deposit boxes to virtual vaults, we must ensure banks can meet the financial services needs of their customers today," Brooks said. "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."

The guidance, as the OCC points out, is similar to what many U.S. states has already provided to their state-charted banks and trusts.

The U.S. is just the latest government internationally to green light crypto custody services for its financial institutions. The Swiss Financial Market Supervisory Authority (FINMA) recently approved crypto custody services for Maerki Baumann and Incore Bank.  And in Germany, dozens of banks have reportedly applied to offer the services after detailed guidance was released by BaFin, Germany’s Federal Financial Supervisory Authority.

One of the primary services offered by crypto custodians is the holding of digital keys. These complex keys are not easy to remember.  Losing a key can mean losing the digital assets all together.  Storing keys with a financial institution could help safeguard against lost keys or theft, the OCC stated.

The idea of holding digital keys in the “safe deposit box” world of financial institutions may give some coin holders an added sense of security.  But skeptics remain, especially among those who believe self-custody of digital assets is key.

The news lit up Twitter as crypto fans reacted to the U.S. News. “If you trust anyone else with custody of your Bitcoin, you lose sight of why you use Bitcoin in the first place,” @G42Tm tweeted.  Yet others saw the move as another step toward mainstreaming digital currencies. “Crypto has made it!” tweeted @CryptoLark.

Whether individual digital coin holders take advantage of the new services remains to be seen.  To date, the majority of crypto custody services have been targeted to and embraced by institutional investors, who secure their vast assets with organizations such as Coinbase. The value of the U.S. ruling remains to be seen as crypto continues its march toward the mainstream.

Joyce Pavia Hanson