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Jul 29, 2020

Is Bitcoin docking with Bank of America about to produce more grayscale companies?

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Last week, digital currency enthusiasts on Twitter “fried the pot” again.

On July 22, local time, Jonathan Gould, Senior Deputy Auditor and Senior Legal Counsel of the U.S. Office of the Comptroller of Currency (OCC), stated that according to their conclusions, banks can provide customers with digital currency custody services, including holding cryptocurrency keys. The statement also said that this conclusion applies to national banks and Federal Reserve Associations of all sizes.

This means that the OCC is granting banks the authority to custody digital currencies. The OCC supervises the review, processes, procedures, and resources of the banks, and has the right to revoke the qualifications of the nationwide banking business.

In short, we can expect more banks to become the next “grey”.

The crypto community welcomes “knockers”

One stone stirred up a thousand waves.

On Twitter, the founder of Capriole Investments quickly responded: “U.S. financial institutions have promoted many global financial actions, which may trigger a global domino effect.”

Sichuan Chang analyzed some optimistic expected results under the OCC license:

1. The obstacles required for banking institutions to provide cryptocurrency-related services are greatly reduced

2. If a banking institution provides cryptocurrency services, it will trigger competition in the industry, thereby promoting the popularization of cryptocurrency services.

3. Grayscale currently holds 2% of Bitcoin. Assuming that even if 1% of banking funds enters, the volume will not be less than Grayscale.

However, Blocklike found that many enthusiasts in the crypto community still hold different opinions.

Many retail investors questioned the bank’s authority: this allows the bank to freeze the funds, and the user’s token will be imprisoned in the FIAT banking network in this way.

At the same time, investors with conservative views think this is not a short-term event. Compound General Counsel Jake Chervinsky said: “Banks are allowed to connect to the digital currency system. However, whether these banks will actually move is another matter, and they may not make this choice in the short term.”

Ang Lee from IDEO CoLab analyzed that the real problem is “time”, not “whether”.

Take Fidelity as an example. It started to get involved in Bitcoin as early as 2014 and only launched its custody business, Fidelity Digital Assets, in 2019, five years later. It took a lot of work to determine Fidelity-scale secure hosting.

Ang Lee believes, “From the current traditional banks to be able to provide digital currency-related services to their customers, there is still a lot to do. In fact, most banks do not understand how to take first place in digital currency. Step. At present, the knowledge of most banks is theoretical rather than practical, and they do not have an environment of using decentralized public cryptocurrencies such as Bitcoin or Ethereum in an on-site environment. Therefore, even though this market is attractive Today’s banks still need sufficient strength to be able to implement this new regulation.”

Hosting: The best way for “outsiders”

In any case, more people have a positive attitude towards this.

Weibo Big V Blockchain William said: “Custody is the best way for people outside the circle.”

In the traditional financial industry, a “custodian” is a financial institution that deposits securities and other assets on behalf of institutional investors to minimize potential loss or theft risks. Before the digitalization of financial markets, custodians generally held a large number of stock and bond certificates. Nowadays, there are many types of bank custody business, including securities investment fund custody, entrusted asset custody, etc., and they are moving in the direction of digitization.

Overseas digital currency custody service providers have seen new business in recent years.

In digital currency, the custodian represents professional institutional investors to store digital assets, provide storage services, and charge a small fee. Through the custodian, investors who are unfamiliar with digital assets can still invest in this new asset class through the gate. At the same time, it can also help the traditional investment institutions they have cooperated with to enter the digital asset market and purchase Bitcoin assets.

Previously, the cryptocurrency custody business was only carried out in some professional institutions, such as Coinbase. In the OCC statement, the OCC stated its position that if banks can effectively manage risks and comply with relevant laws, they can choose any type of compliance business (including digital currency business) to provide banking services.

As a result, large compliant financial institutions that already provide similar custody services for stocks and others may join to help their customers “lock-up” Bitcoin. The traditional users of banking institutions include foundations, family wealth management, national wealth funds, pension funds, mutual funds, and so on.

According to a paper previously published by Messari researcher Ryan Watkins, as long as the institution’s total allocation of bitcoin reaches 1%, it can “slightly” increase the total market value of bitcoin to more than $1 trillion.

Of course, the banking industry may take some time. The digital currency community still needs some patience.

According to An Li’s analysis, if a bank starts from scratch, it will take at least 2 years from the beginning to the beginning of the service: “The bank needs 3 months to appoint a leader and set up a team. It takes 3 months to research and formulates recommendations, 3 months to approve and budget from senior management, 3 months to build an executive team, and 12 months to enter the market-including testing, cybersecurity, and information security assessment And legal compliance-at least two years.”

In the next 12 months, what real changes will the industry produce?

Ang Lee told Blocklike: “Banks will focus on BTC and ETH first, and their banks will only first contact “safe” digital currencies like Bitcoin (BTC) and Ethereum (ETH). This also means that from Within three or four years from now, banks will not support other digital currencies or similar alternatives. Citigroup’s annual revenue is 74 billion U.S. dollars. They will be happy to support users’ BTC or ETH deposits.

“At the same time, now is a great time for blockchain technology infrastructure providers,” he said. “Now banks are more eager to seek external solutions. Building a new team is not the first choice. Banks will choose to buy or cooperate to speed up entry. Market time, next we may see financial institutions such as JPMorgan Chase and Bank of America, financial technology companies such as PayPal and Square, and traditional financial infrastructure providers such as Nasdaq and Fiserv for high-quality blockchain infrastructure. The company makes a strategic acquisition.”

“But it takes time, so don’t expect Bitcoin or ETH prices to soar rapidly now.”

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