This New US Federal Agency Ruling Could Turn the Tables for Your Cryptocurrencies


  • OCC introduces new framework to lower access barrier for cryptocurrency
  • U.S. federal banks can now offer cryptocurrency custody services to clients
  • Institutions like JPMorgan and Goldman Sachs can look after your Bitcoin
  • Banks could potentially target cryptocurrency custody providers

From the coronavirus pandemic to implications of massive moves by the Federal Reserve, there’s been no shortage of watershed moments rattling the U.S. financial system. Despite the souring market sentiment, analysts say the cryptocurrency economy is set to buck that trend. Shock waves aside, history might also remember 2020 as the year opportunities emerged. 

On July 22, the Office of the Comptroller of the Currency (OCC) announced that nationally chartered U.S. banks can now jump into the cryptocurrency custody area. 

Bitcoin meets banking: a new frontier in U.S. financial services 

In a letter addressed to an unnamed bank, the OCC concluded that the provision of custody services, including the holding of unique cryptographic keys associated with cryptocurrency, is now permissible by a national bank. The statement also reaffirmed the need for banks and other service providers to leverage new technologies to better serve their customers’ needs:

“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.”

This bold clarification could forever change the way U.S. banks interact with cryptocurrency at a time when mainstream narrative has been shrouded in mystery at best, and skepticism at its worst. With big banks now able to hold BTC the way they hold dollars, this could theoretically make it easier for traditional investors to buy and store BTC. 

When new technology meets old systems 

Of course, custody is one thing. Secure custody is another. 

While it is now permissible for financial institutions to become cryptocurrency custodians, that doesn’t necessarily mean they will dominate the market any time soon. To drive growth in the new cryptocurrency economy, both traditional custodians and crypto-natives must develop capabilities to engage with and, more importantly, assure owners of the safekeeping of their cryptocurrency. This requires an entirely new infrastructure design that’s able to build, buy or engage with specific needs. Established cryptocurrency custodians like Gemini and Coinbase already offer these highly niche services. Now, it’s time for the big banks to catch up. 

Source: KPMG 

This raises the question, though: Should custody providers be worried about banks coming after a piece of their pie?  

Banks and non-bank custodians: friends, not foes 

The bulk of banks and traditional financial institutions don’t know much about the cryptocurrency industry and the way it works. They will need tried-and-tested asset storage technology, which would naturally lead to smaller cryptocurrency custodians, with good technology in place, acting as partners or sub-custodians for the banks. 

In the UK, we’ve seen at least one such example. In July 2020, Standard Chartered announced plans to launch their own institutional cryptocurrency custody business, set to launch later this year. The news came on the heels of the bank’s $17-million Series A investment into Swiss-based cryptocurrency custodian startup, Metaco. According to a Standard Chartered representative, Metaco is slated to be one of the key technology providers for Standard Chartered’s venture into its cryptocurrency custody business. 

Catching up on cryptocurrency 

In the greater scheme of things, the role played by custodians is paramount for the next step of cryptocurrency adoption. As regulation and technology progresses, the world of digital assets opens up. More than likely, this move by the OCC will serve as a catalyst for clarity from global leaders, including Washington, regarding a more solid regulatory framework for the cryptocurrency industry. But the real work begins once the dust settles from this watershed announcement.  

Groundbreaking as it is, this announcement shouldn’t necessarily come as a surprise. Since taking the helm as Acting Comptroller of the Currency in June 2020, ex-Coinbase Chief Legal Officer Brian P. Brooks has been steering the agency towards progressive advancements on cryptocurrency. Among his top priorities as acting chief was to gather input from banks across the country on cryptocurrency rule policies. From an industry perspective, this shift provides more evidence that the OCC is positioning itself as an intercessor between bank-fintech partnerships.

Governing keys to the cryptocurrency kingdom

Custody of cryptocurrencies is a complex and highly-specialized endeavor, fundamentally operating on a security web set in place to protect the traders’ assets. Importantly, the OCC makes clear that banks that offer cryptocurrency custody solutions must take on the responsibilities assigned to them, including a duty to ensure compliance with regulations such as anti-money laundering and countering the financing of terrorism requirements. 

Leaders in the financial sector and technology space, including KPMG, are looking to develop these capabilities. Acknowledging a broad acceptance of cryptocurrencies in enabling robust new ecosystems of commerce and trade, the “Big Four” consultancy giant, in a March 2020 report identified four key building blocks necessary to develop a successful cryptocurrency custody model:

  • Next-gen security and resilience
  • Comprehensive compliance
  • Third-party trust
  • Value-added custody 

Bybit welcomes OCC’s stance on digital assets 

Safekeeping the highest level of security and governance is a long-term commitment. At Bybit, we believe that the establishment of credible custody solutions is key for the wider adoption of cryptocurrencies in financial services. We are extremely encouraged by this move and the prospects it brings for the future of financial services. The OCC’s stance on digital assets is a milestone celebrated by our organization.  We remain committed to finding partners among institutional banks that can seamlessly integrate cryptocurrency within their infrastructure in compliance with any complex regulatory and licensing requirements.