The race is on: Which banks will be first to offer secure crypto custody services?
- July 25, 2020
- 4 minutes read
The world of crypto seems to have just reached a tipping point: after being around for over a decade (Bitcoin was created back in 2009), U.S. regulators have just announced that American banks and federal savings associations can provide cryptocurrency custody services to their customers.
“National banks may provide permissible banking services to any lawful business they choose, including cryptocurrency businesses, so long as they effectively manage the risks and comply with applicable law”, stated the Senior Deputy Comptroller and Chief Counsel at the U.S. Office of the Comptroller of the Currency (OCC). “We conclude a national bank may provide these cryptocurrency custody services on behalf of customers, including by holding the unique cryptographic keys associated with cryptocurrency”.
The statement, issued on July 22, surprised many in the financial world. After years that crypto was considered a niche currency used by early adapters of tech trends – now it’s becoming mainstream. The OCC also quoted a recent survey that found that almost 40 million American own cryptocurrencies.
What does this mean for banks?
Handling crypto is now no longer just in the hands of digital exchanges and specialized custodians. With the market opening up to all banks across the country, a new race begins: which banks will succeed in swaying customers to deposit their Bitcoins, Ethereum and other digital currency in their safekeeping? Earning customer trust in offering crypto custody will not only create new revenue streams for traditional banks (in the form of custody fee, staking and tokenization of assets) but also bolster their position as innovative financial institutions that successfully completed their digital transformation.
The key is in security
Custody is often seen as a commodity. With the new regulations in place, how can banks differentiate their offering as crypto custodians? The key seems to lay in security. While crypto currencies offer a host of benefits in areas such as liquidity and operational efficiency, they were also subject to major fraud schemes and theft: in 2019 alone, as much as $4.5 Billion in crypto currency were stolen by hackers. Being able to offer a rock-solid custody solution can not just save banks truck-loads of money from potential theft, but also help them draw new customers and increase market share in this rapidly growing market (which is expected to keep growing even faster in light of this new regulation, as more customers would consider diversifying their portfolio with digital assets). The size of the crypto market is on the rise, and all banks are going to want a piece of it.
Deploying a secure end-to-end custody platform – in days
The race is on. Financial institutions that so far have been hesitant to dip their toes in the crypto pool have got to re-think their growth strategies to include crypto custody, and do it quickly – without compromising on security. GK8 is in a unique position to offer traditional institutions exactly that: our end-to-end platform enables traditional banks that still haven’t entered the blockchain domain to offer full-fledged custody services on the blockchain, in just days.
While there are many cybersecurity solutions that claim to safeguard crypto assets, GK8 has the ONLY real air-gapped vault that creates and signs blockchain transactions while staying 100% offline, using a patented cryptography technique and a unidirectional connection. This means that data can only go out from the vault, never in – eliminating the major vulnerability that all other wallets out there have.
Cryptocurrency is changing, for good. Banks that will act fast and offer a secure crypto custody solution will gain a first-mover advantage that can have a significant impact on their business for years to come.