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Report: US Regulators Examine Alternatives for Banks to Hold Crypto

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The latest from Las Vegas is that the US is looking to provide clearer paths to banks to hold cryptocurrencies. The idea is to bring the fast developing asset activity within the bank so that it can be regulated. From a federal perspective, it is difficult to regulate any assets that are outside the bank. There are three regulators in the US banking system- FDIC, Office of the comptroller of the currency, Federal Reserve.

Regulators are still finding a way to bring cryptocurrency in to the traditional banking system. Some banks like U.S. Bancorp have even announced that they would be launching a custody service for cryptocurrency. This is for the benefit of institutional investment managers. Cryptocurrency is the fastest growing digital asset. The goal of this regulatory group is to enable banks to hold these digital assets in the form or custody or essentially in their balance sheet. There is no doubt that digital assets have a short history with high-stakes and is led by technological advances. The goal for the regulators is to go on a crypto sprint to catch up with all the changes in this emerging industry.

The explosion of stable-coins and other digital currencies whose value is pegged against the dollar is already in use for digital transfers and lending. And that is an important reason regulators want to move on a crypto-sprint on regulation.

The goal of regulators is to provide the safety net, consumer protection and financial stability of the traditional banking system to investors. On the other hand, the cryptocurrency market backed by blockchain technologies essentially removes intermediaries and does not even collect a user’s personal information. It will remain to be seen how regulators approach the confluence of the traditional systems and the digital asset explosion.

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