State Street and Citi plan to launch Bitcoin and cryptocurrency custody services in 2025. They plan to use their experience in the crypto custody area.
The envisaged changes in the regulatory situation by the Office of the Comptroller of the Currency (OCC) are the motivation for this initiative. The office aims to give national banks a path to keep digital assets, therefore enabling the regulatory framework for institutions.
State Street was involved with cryptocurrency, working on a joint tokenization project with Taurus, a Bitcoin custody and tokenizing specialist.
Fortunately, banks could automate digital securities, fund management vehicles, and digital asset issuing and servicing. However, they faced various difficulties.
For example, banks find it too expensive to keep crypto assets in line with Staff Accounting Bulletin 121 (SAB 121) released by the Securities and Exchange Commission. However, the SEC is considering adjustments to satisfy bank concerns and alleviate the load on custody services.
Effects on the Ecosystem of Cryptocurrencies
With State Street and Citi linked to offering crypto custody solutions, they are helping institutional investors overcome their concerns about cryptocurrencies. The comfortability of investors can lead to increased capital flowing into crypto.
Also, including crypto custody among the banks’ products could encourage the development of fresh financial solutions covering both traditional and digital economies.
Furthermore, the actions taken by US banks can motivate similar behaviour among financial institutions worldwide, thereby accelerating the global acceptance of digital assets.
Still, the legislative situation around cryptocurrencies is evolving and erratic. This suggests that banks must change to meet the challenges of negotiating complex compliance regulations and specific risks associated with digital assets.
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