Bank Crypto Custody industry is going to boom, thanks to Brian Brooks’ magic. Banks are now allowed to custody crypto for their customers by the U.S. Office of Comptroller of Currency (OCC).
OCC is an independent body within the Treasury Department of US Government. The clarification from OCC states banks can start providing services to custody cryptocurrencies.
Announcement from OCC is just a clarification and not change in stance. This request for elucidation is from an unknown beneficiary. Banks have always been able to custody fiat in digital form in the last 3 decades. Bitcoin and the rest of cryptocurrencies are just an extension to the digital asset narrative.
Since the official clarification comes from the Governmental organization, banks will now create their own products that helps hold customer’s cryptocurrency assets. These services can be in the form of custodying crypto itself or just the keys for the customer. We will see more, when the custody space develops further.
Not your keys, not your bitcoin is for retail customers. Institutions may not want to deal with the risk of holding private keys and other complex things that comes along with blockchain. So, Custody service may be highly sought out in the near future.
What is OCC?
The Office of Comptroller of Currency (OCC) charters banks , regulates and supervises them too. And, they also have power that extends to regulating foreign bank agencies.
OCC is an independent body of the Department of Treasury and Comptroller of the Currency acts as the chief. Bank Crypto Custody rules falls under the purview of OCC.
Who is the Comptroller of the Currency?
According to OCC Treasury website, Brian Brooks is the Currency Comptroller of USD right now.
Mr. Brooks succeeded Mr. Joseph Otting as the acting chief Comptroller. His appointment came from Secretary of Treasury Department, Steven Mnuchin.
Before joining OCC, Mr. Brooks was the Chief Legal Officer (CLO) of Coinbase Inc and his responsibility was to keep Coinbase highly compliant with laws in every jurisdiction they operate in.
According to Housingwire, Secretary of the Treasury Department Steve Mnuchin enjoyed fully working with his former colleagues at One West Bank so much, he’s moving them to lead the OCC. Brian Brooks had to sell his $4.6 Million of Coinbase shares, to avoid conflict of interest when holding the public office position.
My personal feeling is that Mr. Brooks was brought in specifically to clean up the process and make Cryptocurrency a mainstream financial product and develop a legitimate industry for it. Since he was already heading the legal and compliance at one of the largest Cryptocurrency exchanges in the US, this was a natural transition for him.
Brokerage powerhouse Fidelity congratulated the OCC announcement in Twitter. They applauded the regulator’s focus on digital currencies. Finally, they also reiterated their exisiting instiutional grade custody service is open for all institutional customers.
What did the OCC Clarification include?
A Detailed Intepretation Letter by OCC helps banks to get more confident and venture in to the Crypto space. They may now concentrate on developing sound full scale services and products for customers.
Also, this is what Mr. Brian Brooks had to say about the clarification
From traditional Fiat Currencies to new age digital cryptocurrencies, we need to make sure banks meet customers’ need for financial services.
Why Bank Crypto Custody Actually Matters?
Allowing bank Crypto Custody is a significant move for cryptocurrency space in the US. The official government clarity will enhance companies taking a clear stance on crypto and developing strong services. This will create a ecosystem of products based on the risk profile, willingness to try and usage of cryptocurrency in day to day transactions.
The detailed clarification letter explains that the market is asking for custody services with highly secure institutional custody services. Bitcoin and rest of cryptocurrencies are making a huge claim to revolutionize banking through decentralization. The crypto community should be thankful to Mr.Brian Brooks and the OCC for sending out the clarification at the right time.
Cryptocurrency allows hodlers to govern their money in a highly secure hardware wallet, without any need for a centralized bank. Some retail customers and institutional consumers may still like the additional protection and customer service that comes with a bank. People may want service when they deal with large amounts of money.
Cryptocurrency, though, derives its strength from its permission-less nature. It means there will be no customer service to contact if you make any mistake. So, for paranoid customers who don’t want to take control of their money, this is a great news.
Crypto Community may also want to accept that centralized custodian entities for crypto safe keeping and/or storage are fully essential. With official clarification, there will be increase in competition for providing custodian services. Hence, the cost of custody will come down and the quality of service will increase.
Finally, Mr.Brian Brooks rightly deserves huge credit for helping cryptocurrency ecosystem in a big way. He is probably driving the shots and giving the green light to banks to start custody service. Remember, it’s an even more incredible achievement considering he only assumed office in March 2020.
I hear banks are getting into #crypto. 😂
— CZ Binance (@cz_binance) July 23, 2020