FDIC Chair Reveals Banks Should Be Allowed to Hold Cryptocurrency
The call for banks to provide custody services for cryptocurrencies, such as Bitcoin has become widespread. Recently, the Chair of one of the top financial regulators Federal Deposit Insurance Corporation Chairman Jelena McWilliams, shared her views that financial institutions like banks should be allowed to hold digital assets for themselves and their clients.
In an interview with Reuters, McWilliams revealed that she supports the call to allow banks to hold digital assets both for their clients and themselves. She added that it was time to allow banks to hold cryptocurrency, while managing the risks. McWilliams has stated that the FDIC alongside the OCC is working on formally enabling banks to hold digital currencies.
The FDIC And OCC Will Pave The Way For Banks To Act As Crypto Custodians
The Office of the Comptroller of Currency and FDIC are collaborating to formulate crypto policies that will provide banks with a regulatory framework for storing cryptocurrencies. McWilliams said that the interagency group’s objective is to create a path for banks to provide custody services for crypto assets and use them as collaterals.
Allowing banks to act as custodians of digital assets was initially suggested by the former Chief Legal Officer at Coinbase Brian Brooks. Brooks advised the OCC to formulate rules that would allow federal banks to take custody of digital assets on behalf of their clients. With millions of Americans dealing in cryptocurrency, it’s necessary for banks to satisfy the financial services needs of their customers, and that includes safeguarding valuable assets, such as cryptocurrency.
The OCC drafted some rules based upon Brooks’s suggestions, but the draft was put on hold by Michael Hsu, the current Comptroller. Amidst calls for a review of the draft, the Comptroller wrote to the House Committee on Financial Services that the draft wasn’t fully coordinated with all the stakeholders.
Banks Are Working on Providing Cryptocurrency Custody Service
McWilliams statements come after a Politico report stated that OCC staff revealed that banks could trade crypto on behalf of their clients. This move was even endorsed by the agency’s chief counsel. Banks like the U.S. Bancorp are also working to provide cryptocurrency custody service with emphasis on investment managers. U.S. Bancorp is the 5th largest bank in the North American Nation based on holdings.
McWilliams reiterated the need to allow banks to hold digital assets on behalf of their clients. The Chair said that if they didn’t bring the activity to the bank, it was going to develop outside the financial institution.
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