Acting Comptroller of the Currency Brian Brooks says US banking institutions are investigating ways to support crypto assets for interested clientele.
In an interview with Laura Shin, host of the Unchained podcast, Brooks shares his insights on the ways in which US banks have begun to explore the pathways toward crypto adoption in the wake of the Office of the Comptroller of the Currency’s (OCC) decision to grant banks the right to provide custody for cryptocurrencies.
The OCC’s letter awarding banks custodial rights to crypto assets was released in July, clarifying that banking institutions should be able to safeguard customers’ most valuable assets, which today for many include cryptocurrencies.
Shin addresses the OCC’s determination, asking Brooks if he’s seen a change in attitude towards cryptocurrencies from large financial institutions since the letter’s publication.
“Well what I have heard, in the grapevine and I’ll bet a lot of your listeners have heard the same thing, is that since our letter came out a number of big crypto custodians Anchorage, Coinbase, and a number of others, have been contacted by banks about whether they’d be willing to be like the third-party custody providers for national banks whose customers want to invest in Bitcoin.”
Brooks posits that the complexities involved in developing an internal framework to function as custodian to cryptocurrencies will motivate banks to continue to reach out to existing centralized exchanges to store clients’ cryptocurrencies.
“So, in a world where you know look, you’ve got major institutional endowments, like the Harvard and Stanford endowments, who are invested in you know significant amounts of Bitcoin, in a world where you have institutional investors looking for a qualified custodian for their Bitcoin, and everything else, I think it is pretty likely that the trajectory will be that banks will not want to build their own custody capacity. This is very technically complex, but what they’ll want to do is either buy crypto custodians, or partner with crypto custodians to provide those services on their behalf and now they can legally do that.”
Brooks also says that he noticed an almost immediate reaction in crypto market prices following the letter’s release.
“Honestly, one of the most interesting things is that I observed shortly after that letter came out, Laura, was that the price of most crypto assets went up in a few days following the release of that letter, which I think signals that institutions felt safer in investing in an asset that they have custody in the bank.”
In the long-term, Brooks adds that increased banking support for cryptocurrencies could open up the space to the average investor who’s currently reticent to jump into the crypto market.
“So, if your average person thinks it’s prudent to have 50 basis points of their net worth in crypto, which you know a lot of investment advisors say is a prudent allocation, they’re going to feel much safer knowing that JP Morgan is the custodian of their crypto, than feeling like the custodian is some entity, they have never heard of, in South Dakota. So, I think the demand increase is going to be noticeable.”
According to Brooks, there are currently 40 or 50 million Americans who own crypto assets.
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Featured Image: Shutterstock/Matej Kastelic