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Federally Chartered Banks and Thrifts May Provide Custody Services For Crypto Assets


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7 hours ago, VanGogh said:

https://occ.gov/news-issuances/news-releases/2020/nr-occ-2020-98.html

credit to XRPDarren @Fame21Moore for pointing me to this article

"From safe-deposit boxes to virtual vaults, we must ensure banks can meet the financial services needs of their customers today," said Acting Comptroller of the Currency Brian P. Brooks. "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."

Best news since ages!

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Tweet thread by Caitlin Long 

1/ GAME ON! The @USOCC's announcement that it's following #Wyoming by allowing national banks to custody #digitalassets is GREAT news for #crypto! Long overdue & hopefully will help U.S. regain ground it lost to other developed world countries by dilly-dallying for so long.

2/ Winners=customers & #crypto VCs. This will spur M&A boom as US banks acquire #digitalasset custodians. Most must sell bc:
a. trust co. charters now obsolete &
b. #BitLicense now obsolete 👏

bc @USOCC leapfrogged 'em. Custodians now MUST have a bank charter to be competitive.

3/ But @USOCC didn't leapfrog #Wyoming, bc we already offer a bank charter.🤠

What's the distinction? A bank license was **ALWAYS** the optimal US regulatory structure for crypto custodians--not a trust charter or #BitLicense. Bank charters are SO much better for #crypto custody

4/ Why? Many reasons.

*Banks can do all kinds of things that non-banks can't do, mostly bc ONLY banks have direct plumbing into US dollar payment systems. This is why it's SO much harder to get a bank charter than a trust co or money transmitter license (+takes 9-12 months).

5/ *Banks MUCH better capitalized (trust co. minimum capital requirement $100,000 in one state, $1 million in another. But for banks it's ~$25 million!!! Massive difference).

*Banks have much stricter prudential oversight (more rules, regular exams in deep detail, audit rqmt).

6/ Ask your trust company how many times they've had a regulatory exam (hint-most haven't, ever).

*Banks have direct access to the Fed--indeed, this is why big securities custodians are all banks (bc institutional investors value this!)

*Banks have clearer rules in bankruptcy

7/ In bankruptcy, bank regulators must respect segregation of assets. By contrast trust cos are subject to the US Bankruptcy Code where judges can break contracts & break your asset segregation at the very time it really, really matters to you.

I'd add more...but u get picture.

8/ It was **ALWAYS** the case that bank licenses would evolve as preferred regulatory structure for #crypto cos in the US. Trust cos=! I figured all this out 2 years ago, when the #Wyoming #Blockchain Task Force started looking at creating a #bank that could custody crypto.

9/ Back then I had no plan to start a bank--wanted others to do it (it's wide open to all). Many tried. But it's REALLY hard to start a bank. So here I am at @AvantiBT.

#crypto needs a bank--not the bad kind, but a native co that happens to have a bank charter. HUGE difference.

10/ Soon, @AvantiBT will update you on where we stand. It has been a REALLY heavy lift but we're almost ready--our charter application has been accelerated & we should be open in ~Oct. We'll release a few details on what we're up to--doing things in crypto that ONLY a bank can do

11/ Example: @AvantiBT has a new product to modernize US dollar payments, which legally only a bank can issue. Called #Avit, it's nicknamed the "#stablecoin disruptor." It's not a security & will prob be treated as a cash equivalent (a v. BIG DEAL!!). It offers legal certainty...

12/ ...bc it will be issued under existing US commercial laws. Programmable via Avanti's user-friendly API, #Avit is ideal for use by institutional traders & corporate treasurers who want real time settlement of US dollar payments. More details in our forthcoming press release.

13/ #Avit has been thru the regulatory wringer. It has no comparable in the market today, nor will it, #probably. Anchored to public #blockchains, it's better than a #CBDC.

All this is good for #crypto. Again, its service providers should have bank charters for very good reasons

14/ But, do I worry about the @USOCC announcement?

Yep, I worry it's not possible for a bank to custody #crypto in a safe & sound manner anywhere in the US except in #Wyoming.

15/ Why? Bc neither the OCC nor the other 49 states yet have the necessary comprehensive legal structure in place. That legal structure must cover commercial law, property law, tax law & banking regs. Only #Wyoming has clarified all these & most are state (not federal) laws.

16/ Yep, there's significant legal risk to transacting in #crypto in US bc commercial law treatment of many #cryptoassets is unclear (esp if one party to transaction isn't an intermediary). Are transactions legally enforceable??? This is a BIG impediment to institutional adoption

17/ And how many regulators are ready to supervise #crypto? Answer: exactly one. Only #Wyoming has a comprehensive framework & supervisory manual--it doesn't exist elsewhere yet. It's coming in other states and at the @USOCC, for sure, but it's gonna take time. It requires...

18/ ...commercial law (#UCC) & tax law clarifications & #digitalasset custody rules + a supervisory manual for regulatory exams. Only #Wyoming has all this already--which is why I believe it's the only place where crypto custody can be done in a bank in a safe & sound manner.

19/ In closing, I've been thinking a lot about the big banks getting into #crypto since 2012 (& was part of a big bank's #blockchain working group 2014-16). There are HUGE differences between traditional financial institutions & #digitalasset cos. It's cultural but it's more too.

20/ It's also big differences in skill sets. The system architectures of trad. banks & crypto are polar opposite. Trad banks have centralized architecture--they own all data & reconcile against counterparties; they use firewalls but data behind firewalls generally not encrypted.

21/ By contrast, #crypto architecture is fundamentally decentralized; all data is shared, there are no firewalls & all data is encrypted. This is a totally diff. skill set & mindset. If the right team to bridge this huge divide hadn't joined, I wouldn't have started @AvantiBT.

22/ There's too much risk for big banks to build #crypto custody on their own (tho some will try). The big banks generally know this, tho, which is why I believe an M&A boom is abt to start in the industry--bc many will choose to buy instead of build. And the sellers need to sell

23/ Why? bc banks can do so much more than incumbent (non-bank) #crypto custodians can do--plus banks offer better legal, capitalization & bankruptcy protections to customers. Example--only banks can settle #crypto & US dollars simultaneously.

I love where #Wyoming is here.

24/ Wyoming was ahead when we invented the LLC in 1977 (at first everyone ridiculed us, then they copied us), & when we gave women the right to vote 150 yrs ago (at first everyone ridiculed us, then they copied us). #Wyoming isn't afraid to lead. The pattern keeps repeating.🙏🤠

PS-@mikejcasey, see #11. Forgot to tag u. When I listened to ur @laurashin podcast w/ @nfergus, I abt fell out of my chair at the end bc u described #Avit almost to a tee--but I don't think u knew about it. Yep, it's already far down the reg path. Something about great minds...🤠

 Caitlin Long 🔑

 

Edited by strikerjax
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Just LOL at the FUDsters crying over the last few years. This is a humongous step in the right direction. Not sure how it will affect short term price if at all, but expect more things like this to roll out over the next few months and years.

Things have been moving. It is easy to forget that when your only compass is the price.

Edited by mrhat75
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