The surge in price concurs with an unanticipated pronouncement by the Office of the Comptroller of the Currency (OCC) allowing the US banks to store cryptos.
Practically, the decision implies that the US banks are now free to offer cryptocurrency custodial services.
The cryptocurrency market was buoyed by the decision. Along with BTC, Ether (ETH) also recorded gains of 12% in the same period, with the price reaching $273.50. Brian Brooks, OCC’s acting Comptroller, opined that banks could offer “tens of millions of Americans” cryptocurrency custody and other related services.
Brooks 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.”
Concretely, the announcement has paved way for banks to venture into crypto arena and offer a range of crypto related products and services to their clients.
For the whole of 2020, a steady rise in institutional inflow into Bitcoin has provided the necessary upward thrust for the cryptocurrency market.
Recently, Grayscale revealed that it handled $905.80 million worth investments in its crypto offerings so far this year. The company, which administers the Grayscale Bitcoin Trust, documented $1.40 billion worth inflow in the first two quarters of 2020.
Bank administered cryptocurrency custodial services could act as a substitute to prevailing regulated Bitcoin investment offerings.
Investors may regard this as bullish development as it implies additional credentialed and institutional investors could likely invest in the crypto sector in the months ahead.
Peter Van Valkenburgh, research director at non-profit organization CoinCenter, stated:
“Accepting that centralized entities for cryptocurrency safekeeping and storage are unavoidable and essential, then it is excellent news that, thanks to the OCC’s new policies, there will be even more competition for providing those services. National banks entering the game expands that competition and may also allow more traditional institutional investors to deal in cryptocurrencies.”
There is a possibility that the unanticipated notification of the OCC sparked a brusque rise in demand for top cryptos. As a whole, the reaction to the OCC statement was positive. Industry experts believe that it could encourage more inflows into crypto market in the medium-terms.
Jake Chervinsky, Compound Labs lawyer, stressed that the OCC is one of several regulators in the US. There is no clarity as to whether Brooks will stay as Acting Comptroller for a longer duration.
As new initiatives are made by banks on the basis of demand, Chervinsky opined that there is no guarantee for a sudden increase in crypto custodial services. Chervinsky said:
“Banks are ultimately businesses like any other, so they’ll respond to customer demand. But OCC is only one of many relevant regulators, Brian Brooks may not be in charge there for much longer, and banks are psychotically risk-averse / compliance-focused.”
That might speed them up. Banks are ultimately businesses like any other, so they'll respond to customer demand. But OCC is only one of many relevant regulators, Brian Brooks may not be in charge there for much longer, & banks are psychotically risk-averse / compliance-focused.
— Jake Chervinsky (@jchervinsky) July 23, 2020
Per se, it is yet to be determined whether investors are simply utilizing the news as a tale to jack up the market.