US banks get green light to guard customers’ digital currency

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The United States Office of the Comptroller of the Currency (OCC) has announced that national savings banks and federal savings associations are now allowed to provide “safekeeping and custody services” for their clients’ digital currency holdings.

The announcement was made via a public letter that appears to be to an unnamed bank from OCC Senior Deputy Comptroller and Senior Counsel Jonathan Gould. The announcement was later confirmed by the OCC Acting Comptroller Brian Brooks, who said:

“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.”

What this means

The announcement from the OCC means that users can deposit their digital currency holdings with a bank, the same way they would deposit fiat currency at a bank.

“The OCC recognizes that, as the financial markets become increasingly technological, there will likely be increasing need for banks and other service providers to leverage new technology and innovative ways to provide traditional services on behalf of customers,” 

The OCC has made this move to provide support to bank customers and the modern problems they may face, such as safekeeping their digital currencies which is accompanied by the risk of protecting and remembering their private keys. 

“Because digital currencies exist only on the blockchain or distributed ledger on which they are stored, there is no physical possession of the instrument. Instead, the right to a particular unit of digital currency is transferred from party to party by the use of unique cryptographic keys. Therefore, a bank ‘holding’ digital currencies on behalf of a customer is actually taking possession of the cryptographic access keys to that unit of cryptocurrency,” says the letter.

Who will use this service?

This announcement from the OCC is a big step for the digital currency industry; it will help the industry mature and adds to its legitimacy. Although, it is not quite clear who will be using the digital currency service that banks will soon offer. Many digital currency market participants prefer to—and take pride in—holding their own private keys. You often hear them say “not your keys, not your coins,” that being said, it is doubtful that retail investors will be using their banks to safeguard their digital currency.

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What is more likely is that institutional services and digital currency exchanges will turn to these legacy banks to safeguard their digital assets the same way they turn to these banks to safeguard their fiat currency.