One of the fun things about jigsaw puzzles, for those of you that haven’t tried them, is the satisfying snap of pieces fitting together to reveal part of a picture. Another is watching the whole picture emerge as more pieces join.
In July of last year, the U.S. Office of the Comptroller of the Currency (OCC) said that national banks could custody crypto assets. That was a pretty big deal, as, should national banks start to offer this service, investors could in theory ask their habitual institution to custody all their holdings, be they stocks, bonds or crypto. So much easier. A major barrier to crypto investment removed.
In September, the OCC said that they could provide services to stablecoin issuers, such as holding reserves. Banks had been doing this for some time, but in an uncertain regulatory environment. Now they had official approval to do so. Stablecoins backed one-to-one by fiat held in bank reserves are not deemed a risk in one of the most regulated industries in the U.S.
And then this week, the federal banking regulator published an interpretive letter saying that national banks and federal savings associations can use public blockchains to store and validate payments. It effectively awards blockchains the status of “payment network.”
Do you see the picture emerging? It’s not just about expanding the range of products banks can offer clients. It’s not just about offering better payment services. It’s about the convergence between traditional and crypto markets. It’s also about the role of the dollar in the economies of tomorrow.
Let’s look at why this emerging picture is worth paying attention to:
- It is good news for crypto markets: a nudge to traditional banks to offer support for blockchain infrastructure and even facilitate crypto transactions. This makes crypto investments easier for traditional investors, which will bring more money into the industry, which will encourage more infrastructure development, and so on in a…