With traditional banks acting as custodians, is crypto’s decentralized nature under threat?
- Over $200 billion worth of bitcoins have been lost so far. Do people need a better way to secure their digital assets?
- “Not your keys, not your coins,” say crypto traditionalists, arguing the space is meant to be free of banks, with a fundamental ‘one’s own bank’ philosophy.
As the world of cryptocurrencies is booming, everyone wants a piece for themselves. American brick-and-mortar banks are increasingly looking to offer crypto custodial accounts. While this may be seen as an encouraging development, it forces one to reflect on whether such institutional involvement contradicts the basic thesis of cryptocurrencies — with banks acting as custodians, is crypto’s decentralization under threat?
US Bank is the latest to offer crypto custodial accounts. The bank’s offering enables fund managers to store private keys for Bitcoin, Bitcoin Cash, and Litecoin, with assistance from sub-custodian NYDIG. The bank finds the asset class to be of increasing interest to its customers and believes it will continue to gain relevance in the future.
Custodial accounts allow investors to store their crypto assets safely with a third-party service provider. These assets are generally distributed between hot and cold wallets. This allows some to be available for trading and transactions, while others securely sit and gain value.
“Our clients are getting very serious about the potential of cryptocurrency as a diversified asset class,” said Gunjan Kedia, vice-chair of US Bank’s wealth management and investment services division. “I don’t believe there’s a single asset manager that isn’t thinking about it right now.”
Kedia also revealed that Ethereum compatibility can be expected soon.
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