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Every other day cryptocurrencies make a new marker entry. The latest in that line is the adoption by US banks. The banks are looking for ways to enable crypto adoption. It follows a decision by the Office of the Comptroller of the Currency's (OCC) to allow banks custody of cryptocurrencies.

The crypto exchanges are the current custodians. For banks to venture into the sector, they will have to partner or buy the custodians. Acting Comptroller Brian Brooks has confirmed the same. He was speaking to Laura Shin's Unchained Podcast. 

He confirmed having heard a bank have contacted some big crypto custodians. This is to know if they can work as a third-party custody service provider on their behalf. The bank customers investing in Bitcoin will be using custodian platforms. Some of the contacted custodians include Coinbase and Anchorage.

Banks avoid offering custodian services by themselves due to the associated complexities. Setting up a custodian service is more like starting a new financial service. It comes with the need to set up new models of business. These are both time and financial intensive.

Partnering with existing services remains the best way out. By operating on their behalf, the banks would now be offering the services legally. The other option is when the banks buy cryptos custodians.

These new developments are ideal for both banks and crypto users. The banks don't have to worry anymore about losing clients to crypto-financial services. Crypto also gains a secure investment platform. Banks are complaint and would not mess with the client's investments.

The merger almost solves the long-running issue between commercial banks and cryptos. This brings us to the next topic. 

The Shifting Relationship between Banks and Cryptos

The relationship between the commercial banks and the crypto market is ever-changing. 

The banks have always been the custodian of the traditional economy. While central banks produce the cash, they ensure its distribution. 

The commercial banks have been gaining from retail traditional currency transactions. It helps in deposits and other functions. This is all that cryptocurrencies look to change.

Satoshi Nakamoto had an alternative economy in mind when releasing Bitcoin. The decentralized coin was to work without any central authority, thus eliminating banks. 

Commercial banks have since never embraced cryptocurrencies. They tend to warn their customers not to buy cryptos. 

When the difference became apparent, JP Morgan refused to accept Bitcoin as an asset. They instead released a report quashing the coin. They claimed it's volatile and risky. The lack of a backing commodity also caused concerns.  

That is not to say the relationship has been all frosty. Before the JP Morgan report, the firm had embraced cryptos. By the time it was releasing the information, most traders had expected full support. Still, the bank has taken a different stand later on. It has since accepted the coin as an asset. Most commercial banks now accept trading crypto against other currency pairs.

The fight on aiding illegal transactions has also been on for some time. A report revealed that the banks don't trust cryptocurrencies. It showed that the banks felt cryptocurrencies aids illicit transactions like money laundering. Also, they felt the digital currencies are not doing enough to curb the issues.  

The truth is that commercial banks tend to aid most of the illegal transactions. It turns out the banks are not as strictly regulated as most people thought. They only wield so much trust as they have operated for so long.

The new decree by OCC brings a new phase to the crypto-bank differences. After allowing clients to buy cryptos using fiat currencies, they will step even more. Becoming the crypto custodians means they will be more involved than ever. 

The move also makes cryptos more accessible to institutional investors. The clients already trust fiat currencies; they would do the same with cryptocurrencies. As long as the banks are the custodians, both virtual currencies and cryptos would seem the same.

The Future of Banking Amid Crypto Interest 

Banks seeking to buy cryptos is not the end of their shifting relationship. No side will be willing to compromise any time soon. Banks want to keep traditional superiority as cryptos look to take over the economy. It seems like banks looking to buy crypto is a means to the end.

The banks are likely to operate the cryptocurrencies like fiat currencies. They are some of the most regulated entities. They would have to apply the central bank regulations on virtual currencies. This might lead to stability.

The volatility of cryptos has been an issue for most users. The investors prefer when they know their worth. Cryptos yet don't afford one such luxury. They keep on changing in value. With banks operating them, they might become stable.  

While banks might bring stability, they are everything cryptos are not. The crypto does not like the centralized nature of commercial banks. 

The crypto markets are all about freedom. It doesn't need any central authority. They only rely on market forces to determine forces. In the end, the banks and crypto users would clash. 

The operation differences have already happened in Bitcoin before. While one team wanted bigger blocks, the other preferred the status quotes. The standoff ended in the fork to create Bitcoin Cash. The same would happen when banks buy cryptos. They would end up in continued stalemates.

The only way out for banks is through the national cryptocurrencies. Several countries are considering central bank digital currencies. These will operate like traditional currencies, only that they will be on the digital platforms.

Several countries are in the advanced stages of launching national digital currencies. The first to release their coin was the Bahamas. China is also looking to revolutionize the world through the digital Yuan. 

The CBDCs will give the banks and government the power they have now. 

Bottom Line 

The financial services industry changes so fast. At one point, banks discourage clients from investing in Bitcoin. The next moment they buy cryptos. Such changes will be on until cryptos mature. For now, banks buying cryptos is yet another crypto development.

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