The Office of the Comptroller of the Currency (OOC) announced on Wednesday that banks in the United States can now provide crypto custody services. This news helped the price of Bitcoin to surge 5% to $9,664 in less than 24-hours. The OOC decision was totally unexpected, and green-lighted bank operated service of crypto. Ether, the token for blockchain giant Ethereum, also rose 12%.
Announcement Opened Banking Floodgates
The OOC’s statement has effectively opened the floodgates, and banks are entering the cryptocurrency market. They will be able to serve tens of millions of American cryptocurrency customers. Acting OCC Comptroller Brian Books said, “From safe-deposit boxes to virtual vaults, we must ensure banks can meet the financial services needs of their customers today. 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.”
Bitcoin Has Steadily Moved Upwards In 2020
Bitcoin has been the recipient of institutional inflows throughout 2020. It has helped push the cryptocurrency upwards with Grayscale, processing $905.8 million into cryptocurrency products in the second quarter alone. The firm operates Grayscale Bitcoin Trust and saw a total inflow of $1.4 billion during the past six months.
With banks not being able to offer custodial solutions for cryptocurrencies, consumers have an alternative to the current, regulated Bitcoin investment platforms. Investors are viewing the new development as being bullish since more accredited and institutional investors may join in by investing for the long-term.
Research director Peter Van Valkenburgh with non-profit organization CoinCenter stated, “Accepting that centralized entities for cryptocurrency safekeeping and storage are unavoidable and essential, then it is excellent news that thanks to the OCC’s new policies, there will be even more competition for providing those services. National banks entering the game expands that competition and may also allow more traditional institutional investors to deal in cryptocurrencies.”
Reactions To The Announcement Have Been Positive With Some Skepticism
So far, the overall response to the OOC’s statement has been positive and some industry executives feel that it could cause more medium-term inflow into the cryptocurrency markets. However, the OCC is just one of many regulators in the United States. According to Compound Lab’s lawyer, Jake Chervinsky, “Banks are ultimately businesses like any other, so they’ll respond to customer demand. But OCC is only one of many relevant regulators, Brian Brooks may not be in charge there for much longer, and banks are psychotically risk-averse / compliance-focused.” He continued to suggest that since banks move on market demand, there is no guarantee that there will be an upsurge in banks that will offer or support cryptocurrency custody.
The upsurge in the price for both Ethereum and Bitcoin could be a reaction from the OOC’s announcement with investors pushing the market in hopes of more banks adopting cryptocurrency custody. Investors should continue to be optimistically cautious when looking into investments that could utilize bank custodial services until the services are up and running regularly.