If you are thinking of investing in cryptocurrency, read further to better understand the expansion of cryptocurrency into the sphere of traditional finance.
What is Cryptocurrency?
Cryptocurrency is decentralized and encrypted digital money that you can use to purchase goods and services. Many people invest in this digital currency with the same confidence as people who have traditionally invested in stocks and precious metals. Unlike conventional currency like dollars or euros, cryptocurrency exists without a centralized authority.
Transactions are recorded in code and verified by users employing an established validation technique. Verification and recording are accomplished through a program known as blockchain, aptly named because the transaction recording is done in blocks connected in a chain of past crypto transactions.
What Does Crypto Custody Mean?
Cryptocurrency custody, commonly referred to as crypto custody, involves third-party organizations that provide storage and security for investors. Investing establishments like hedge funds looking to safeguard their crypto assets have been the primary recipients of these services. The Security and Exchange Commission (SEC) requires that institutional investors servicing clients with assets valued over $150,000 retain holdings with a custodial entity such as a bank or savings institution.
The marriage of cryptocurrency and banks is expected to be embraced by millennials who seem to be drawn to crypto assets. This generation has been able to ride the learning curve with ease and is comfortable obtaining digital currencies.
What Will the Transition Look Like for Digital Currencies and Banks?
The Bank of New York can boast many firsts: the first stock traded on the country’s first stock exchange, depository for the first trust in America, one of the first national banks to employ a computer and the first bank to engage in online trading. So it seems only natural that BNY Mellon would be one of the first financial institutions leading the charge toward crypto custody.
CEO Todd Gibbons is quoted as saying that “Top executives started asking to treat digital assets as they would their other holdings.” To this end, services will include the following:
- Dynamic platform with the capacity for management of cryptocurrency alongside traditional assets
- Easy access to crypto storage as an alternative to self-custody, removing one of the impediments to widespread adoption
- Portfolio management, which may build out to borrowing and staking (participating in the validation of transactions)
As BNY Mellon implements crypto custody solutions, it is expected that more private banks will follow suit.
Are There Other Banks With Similar Plans?
There is increasing excitement around digital currencies and banks driving the application of these assets toward the mainstream. Here are examples of banks headed in this direction:
- Silvergate Capital: With a year-round 24/7 network and a promise of zero delay in clearing USD transactions, operations align well with blockchain technology. So far, 76 crypto exchanges have been added to the network, and the bank is planning to issue loans with bitcoins as collateral.
- Signature Bank: This bank’s real-time digital payments platform, Signet, allows commercial clients to complete transactions in a safe and secure environment with no transaction fees.
- JP Morgan Chase: JPM coin enables immediate payments through blockchain technology. The bank is the first to mobilize a whole division dedicated to merging blockchain technology with conventional banking.
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