The United States government is once again adding more legitimacy and credibility to the rapidly growing cryptocurrency industry. This is through clear regulations that will further incorporate the sector into the country’s financial system and economy.
In an interview with Reuters, Jelena McWilliams, chair of the Federal Deposit Insurance Corp. (FDIC), said that banks must be allowed to hold crypto on their balance sheets, provide custodial accounts in digital assets and facilitate crypto trading for clients.
Thus, demonstrating the rapid rise of digital assets this year. In addition to the urgency to regulate them in a safe yet sustainable manner.
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.”
“At some point in time, we’re going to tackle how and under what circumstances banks can hold on their balance sheet,” she added.
Comments from a top U.S. authority provide the clearest picture of what the country’s regulators are exploring as part of their “sprint” team that was first announced in May.
The team’s goal is to create cryptocurrency regulations together with all three main U.S. banking regulators. The FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency.
Speaking to the Federalist Society, McWilliams said that she would like the agency to learn from banks about how they are approaching crypto and how the regulator should play its role.
This is also a positive sign that she is keen on collaborating with the crypto industry. Rather than simply cutting off communication, which can be seen in other parts of the world.
Banks could accelerate the adoption of crypto
In general, I am confident that if regulators allow banks to buy, sell and hold cryptocurrency, it would only increase the adoption of digital assets across the U.S. This is because people are accustomed to using banks to invest, hold and protect their assets.
Banks already have a vast amount of customers, with 95% of American households having a bank account. Strong cyber security systems that provide regulators with confidence work alongside this statistic.
As such, consumers will naturally feel comfortable in dealing with banks. Possibly resulting in more Americans than ever before buying, selling, and holding cryptocurrency across the board.
Suppose banks were allowed to hold onto cryptocurrencies, therefore providing custodial services. In that case, it’s likely that one day we will see financial advisors helping their clients all over the U.S. in selecting high-growth funds backed by a basket of different cryptocurrencies.
In the future, consumers will be able to go there and buy bitcoin, ethereum and stablecoins. Just as people can go to their local branch to buy equities and bonds today.
One day, I believe that Americans will also be able to use their online banking to buy, sell, and possibly even stake crypto in the future. Thus, making their crypto investments just as important as their other financial instruments. This would only be the beginning of the transformation of America’s financial system.
In the long run, I foresee Americans that are unfamiliar with crypto first using a bank to get their feet wet, which will be their first stop in the industry.
Making access easier
However, then they will turn to highly innovative cryptocurrency wealth management and savings platforms. These are able to bring products and services to the market faster as they learn more about the industry over time.
Just imagine, users will first give a bank a try in dabbling in crypto. Then they will move to a crypto-focused platform for a more diverse selection of products and services. This would be a boon for not only banks but also blockchain and cryptocurrency platforms across the country as two paralleled financial systems emerge.
Americans would learn about cryptocurrencies through their financial advisor. However, over time, they would become more sophisticated and would begin to shift their assets to the decentralized financial system.
Here, instead of going to their local branch to take out a loan for their car, education, or home, they would find a DeFi platform to get an instant loan. This would require no paperwork, no credit check, all done with just a few clicks online.
This is where the U.S. could in the future if banks could buy, sell, and hold cryptocurrency. It would help accelerate the usage of DeFi, granting all Americans a whole new way to manage their money.
U.S. legitimizes the crypto industry
It is clear that McWilliams comments are a clear signal that the U.S. government is keen on working with the cryptocurrency industry to integrate the sector into the country’s traditional financial system. As such, it further legitimizes the industry and brings more validity to it.
Starting primarily in 2021, U.S. regulators have surprised global crypto investors by demonstrating how open they are to working with the fast-growing industry to ensure that it is safe for everyone involved.
We recently saw that the U.S. Securities and Exchange Commission (SEC) is considering additional proposals by asset managers VanEck and Valkyrie Investments. They are looking to sell their own versions of bitcoin future ETFs to investors.
This means that by the end of this year, global investors may have access to various bitcoin future ETFs. Therefore, providing them with more choices to select the ideal financial instrument for them.
The SEC Chair Gary Gensler also not long ago said that he would not ban crypto. Essentially saying that it would be up to Congress to take action against it if they choose.
His remarks echo those of Federal Reserve chairman Jerome Powell. During a September 30 Congressional hearing, he said that he had “no intention” of banning cryptocurrencies.
I look forward to seeing U.S. regulators further collaborate with the crypto industry. Specifically to increase its adoption, regulate it in a fair manner, and most importantly, to make it more secure and safe for all consumers and investors.