BTC/USD 1-day candles, 28 June 2020 (courtesy TradingView)
US banks allowed to take custody of digital assets
Let’s start with the external factors.
Last week, US authorities gave the green light for national banks in the US to act as custodians for digital assets.
Regulatory body, the US Office of the Comptroller of the Currency, said last week that “national banks and federal savings associations of all sizes” will be able to provide custody services for bitcoin and other digital assets.
Although this is unlikely to lead to a rush of household names in US banking moving into the crypto space, or to provide consumers already holding crypto in their portfolio with a new storage option immediately, it does open the door to competitive arms race, especially on the institutional-facing side.
Whichever way you cut it, even if there are reputational risks for banks, it is big news and the development has already started reverberating through the financial system. And that is despite crypto being not much more than a speck on the landscape in terms of the size of the asset class up against traditional assets such as equities and bonds. It has likely been critical to inspiring the current breakout.
Visa changes tune on crypto – building ‘bridge’
Elsewhere, in a blog post entitled Advancing Our Approach to Digital Currency, payments giant Visa revealed that it has teamed up with US exchange Coinbase and crypto rewards start-up Fold, as it seeks to build “a bridge between digital currencies and our existing global network of 61 million merchants”. That was another sizeable positive for the crypto industry.
The ongoing project is taking place in Visa’s fintech FastTrack programme.
It is worth quoting from the document at length because it represents a volte face by the company. No doubt Visa will insist it is not a change of tune and is instead merely taking account of changed realities, and to be fair it is consistent in its belief that bitcoin will never be a payments rival:
“Today, fiat-backed digital currencies, commonly referred to as “stablecoins,” have emerged as a promising new payment innovation, combining the benefits of digital currencies with the stability of existing currencies like the US dollar. It’s a concept that is gaining traction beyond fintechs, and now includes financial institutions and central banks. Consumers and businesses are also adopting digital currencies and circulation is growing rapidly, reaching over $10 billion in May.”
This striking change of heart by Visa follows the prediction made in interactive investor coverage of the space, that the Libra stablecoin proposal (despite subsequent radical changes in its design), and the advances being made in China on the launch of a central bank digital currency (CBDC), would spur developments elsewhere.
Visa coming out in the open, so to speak, follows hot on the heels of PayPal indicating that it would be bringing crypto services to its customers…