bitcoinmagazine.com
- U.S. regulators are exploring ways for traditional banks to hold bitcoin.
- Banks' BTC holdings could be used for client trading, as collateral for loans, or held as assets in their balance sheets.
- "I think that we need to allow banks in this space," the FDIC chairman said.
A team of U.S. bank regulators is trying to provide a more straightforward path for banks to engage with and hold bitcoin, the Federal Deposit Insurance Corporation (FDIC) chairman said.
FDIC chair Jelena McWilliams told Reuters in an interview on October 26 that a team of U.S. bank regulators is working on a more precise set of rules for banks interested in engaging with Bitcoin and cryptocurrency. That would clarify how U.S. banks could hold BTC in custody to facilitate client trading, use it as collateral for loans, or even hold them on their balance sheets.
"I think that we need to allow banks in this space, while appropriately managing and mitigating risk," McWilliams said. "If we don't bring this activity inside the banks, it is going to develop outside of the banks...The federal regulators won't be able to regulate it."
The FDIC is one of the three leading U.S. bank regulators, including the Federal Reserve (Fed) and the Office of the Comptroller of the Currency (OCC). In May, Fed vice chair of supervision Randal Quarles said the three agencies were working together on a "sprint" on cryptocurrency regulation. McWilliams' remarks indicate that might be starting to bear fruit.
If the task force moves forward to approve a clear path for interested U.S. banks to hold bitcoin, a whole new suite of offerings would be available for customers. A bitcoin holder faced with unexpected dollar expenses could loan it in their usual bank, for instance, rather than coordinating multiple accounts. But perhaps more importantly, this opens up the opportunity for traditional U.S. banks to hold BTC in their balance sheets, a scarce asset that has the power to counteract the huge amounts of debt such institutions issue.
Although this development by the FDIC paves the way for easier mainstream adoption of Bitcoin, users are still economically incentivized to learn and custody their own coins — the only option for unlocking Bitcoin's true potential.