By: Nick Chong Message from the Past -- nine months ago but very relevant today.
On Wednesday, the Bitcoin and crypto market was treated with positive news from U.S. regulators. The Office of the Comptroller of the Currency (OCC) wrote on July 22nd that American banks are allowed to hold cryptographic keys. That’s to say, U.S. financial institutions can be a custodian to one’s cryptocurrency.
This letter from the regulator was immediately seen as one of the biggest Bitcoin-related news in months and years. Here’s more on why this news is so positive for the industry.
The Importance of U.S. Banks Holding Bitcoin and Crypto
Preston Byrne, a partner of Anderson Kill corporate technology group, bluntly said in response to the news that he’s “never been more bullish on crypto than today.”
The commentator argued that in a world where banks are desperate for yield, cryptocurrency financial services offered by Wall Street could boost adoption:
“Crypto lending and saving may be how the payment of interest becomes a thing again. Banks are desperate for yield. The faster they move the more market share they’ll obtain. Will be interesting to see who moves first and how quickly they go about it. But really. Getting out of banking law and into crypto law in 2013 was the best career move I ever made. So much growth yet to come.”
Su Zhu, the chief executive of Three Arrows Capital, explained his sentiment on the news with more nuance, writing:
“US banks being able to offer custody is insanely bullish bc it means the guys like signature/silvergate could onboard fiat deposits -> convert to stablecoin ->get yield in DeFi Incumbents will see this growth and then join.”
The prominent cryptocurrency investor is referencing how Wall Street will see the profits being made by crypto-native banks like Silvergate, then rush into the space to capture that yield.
Against the Ethos of Crypto
As aforementioned, many have embraced this news as a positive catalyst for the market. But there have been reminders shared that banks holding digital assets is a concept technically against Bitcoin’s ethos.
Wayne Vaughan, the chief executive of Teirion, joked: “‘I can’t wait to deposit my Bitcoin in a US bank’, said no one ever.”
Stephen Palley, a partner at Anderson Kill and a popular crypto commentator, said that “While the OCC letter is interesting, I thought the whole point was to be your own bank.”
It currently isn’t clear how some fundamentalists in the cryptocurrency space will rationalize banks holding Bitcoin and other digital assets. But for the time being, it has been seen as a positive growth catalyst. And to some market participants, that is enough.