The recent Comptroller of the Currency (OCC) ruling that national banks and savings associations can provide cryptocurrency custody services to clients is one of the biggest milestones in the short but spectacular lifetime of digital currencies. Now that U.S. banks have the green light to begin custodying crypto, everybody knows that the rules have changed — we just don’t yet know exactly how.
As the dust begins to settle, there are a number of important questions we need to ask. What is the thinking behind the OCC’s letter? Why now? And how long will new Bitcoin enthusiasts be happy to store their coins in a bank rather than self custodying?
Banking On Bitcoin?
Whatever the motivation for this decision, it is good news for bitcoin and other digital currencies, since it represents a long-awaited legitimization. The U.S. government has been wary of digital currencies from the very beginning, but it appears their views are changing, and that can only be good for adoption.
Using a bank to custody coins makes sense for new users wanting to dip their toe into the world of Bitcoin. People immediately gain the peace of mind that a bank brand confers, and this is especially important for those who have always been interested in the concept of Bitcoin, but who never invested because they worried that digital currencies were unsafe or untrustworthy.
Historically, governments have done little to correct this negative perception, which is why the OCC letter is terrific news for all of us who care about Bitcoin. But I’m not convinced that bank custody will work out how the OCC expects.
If bitcoin were just another possession, it could sit quite happily in a bank safety deposit box, along with your heirlooms, jewelry and other precious items. But what makes this currency so valuable is precisely why it doesn’t make sense to keep it with the bank: the Bitcoin network is controlled by the users, and bitcoin itself can be held easily and directly by individuals. It’s…