[ad_1]
As consumer demand for bitcoin grows, a small but growing number of community banks are working with their providers to enable customers to buy, hold, and sell bitcoin and other digital assets. These efforts involve a bank’s primary provider working with a Bitcoin technology company to facilitate the delivery of Bitcoin services, including digital wallets, through the bank’s online and mobile banking apps.
A growing market
News reports indicate that 46 million Americans own bitcoin. This number is certain to increase despite the price volatility associated with these digital assets. Bankers are realizing that allowing customers to keep and view their deposits and digital assets in one place is an attractive option for consumers, and therefore a way for banks to gain new customers.
Also, offering such services is a way to prevent existing customers from transferring their deposits from the bank to a company like Coinbase if they wish to buy and hold bitcoin and other cryptocurrencies. It is important to note that banks can increase their commission income by imposing custodial fees and related fees related to digital asset services.
Favorable regulation
The question naturally arises as to whether cryptocurrency activities are permitted for banks under the law. The Office of the Comptroller of the Currency (OCC) recently issued favorable rulings confirming the authority of national banks to provide cryptocurrency custody services (Interpretive Letter # 1170 [pdf]) and use cryptocurrencies to perform authorized banking functions such as payment activities (Interpretative Letter # 1174 [pdf]).
On May 17, 2021, the Federal Deposit Insurance Corporation (FDIC) expressed interest in the custody of digital assets by banks by issuing a request for information and comment. This request may reflect the fact that the FDIC views favorably the involvement of banks in these activities and seeks to provide regulatory certainty in this area. The deadline for comments on the FDIC’s Request for Information and Comments is July 16, 2021.
Risks and Rewards
Community banks should study the new technology needed to both protect and serve customers using cryptocurrencies. As with any financial transaction involving FinTechs, there are risks and rewards combined with the continued need for compliance. Community banks should seek to serve customers and ensure processes and procedures that protect the safety of all.
Conclusion
As bitcoin and other cryptocurrencies become more popular and accepted in the market, community banks may be well suited to serve their clients in this area and, in so doing, their bottom line.
[ad_2]
picture credit