U.S. banks can now offer bitcoin accounts to their customers, both professional and private. The banking regulator, the Office of the Comptroller of the Currency (OCC), says this provision of cryptocurrency custody services is just another natural step in the role of banks as digitization gradually gains ground.
Meeting customer needs
Until now, only crypto-currency platforms were allowed to store these assets. However, in a statement issued on July 22, 2020, the Office of the Comptroller of the Currency has given the green light to national banks to provide custody and management of crypto-currencies on behalf of their customers.
This decision comes in response to the growing demand for bitcoin account creation. According to a study cited by the regulator, 40 million consumers use crypto-currencies, representing 10% of the population. The OCC believes that banks should also hold the encryption keys that prove their possession on behalf of the customer.
A custody and deposit service
Since their creation, banks have offered a deposit service, enabling their customers to place their money in safe deposit boxes. They are also authorized to provide and manage means of payment, and to offer investment services (savings accounts, passbooks, life insurance, etc.). Some offer a custody service for assets other than the products they offer (property titles, precious objects, gold, etc.).
According to the Office of the Comptroller of the Currency, by providing cryptocurrency custody services and holding the unique keys associated with these currencies, banking institutions are in line with these two pillars.
Finally, the involvement of banks in the management of crypto-currencies could reduce the hacking attempts that target exchange platforms. In 2019, for example, Binance, one of the most popular platforms, was the victim of a massive hack involving $42 million in bitcoins. Although the company pledged to cover the losses with its SAFU (Secure Asset Fund for Users), deposits and withdrawals were suspended for a week.
Freedom to choose the technique for holding cryptographic keys
In its letter, the banking regulator specifies that banks have a choice between: receiving a copy of the customer's key so that the customer can also have possession of it, or holding the investor's key alone. The bank will then be able to manage the customer's bitcoin account according to the customer's instructions.
The OCC nevertheless points to the need to introduce " specialized audit procedures that may be necessary to ensure the effectiveness of the bank's digital preservation controls ".