President Joe Biden is preparing to sign a long anticipated executive order on "crypto regulation" as soon as Wednesday.
First reported by Reuters, the Biden Administration is set to release guidance on a plan to study the "legal and economic ramifications of creating a U.S. central bank digital currency". The executive order is considering adding "wide ranging oversight" on cryptocurrency, as well as appointing an individual to have oversight of the market. In the past months we have seen back and forth between the CFTC and the SEC in who will have regulatory oversight. It is possible that both of these agencies will share regulatory responsibility.
On the heels of this news, Senator Ron Wyden told the Financial TImes "There is obviously a debate, but i want to be on the side of the innovator. When I think about crypto I think about remittances, or sombody who has a kid 1000 miles away and wants to get them help in an emergancy, rather than going through scores of banks, credit card companies" and has urged his colleagues against clamping too hard on the crypto market. Senator Wyden was one of the influential senators during regulation of the internet.
In addition, top officials including Senator Elizabeth Warren have been sounding the alarm regarding crypto and Russia avoiding economic sanctions (read here why we believe this is unlikely) which could push the administration into stricter regulation. One would think, it would be smartest to go slow in rolling out regulation to ensure they get it right. With a current market cap of ~1.72 trillion dollars, and approximately 27 million Americans owning cryptocurrency, hampering the industry would hurt the American people who are already dealing with record inflation, and stagnating wages.
The Virginia Senate Passed a Bill Allowing Banks to Custody Cryptocurrency for Customers
Passed in a 39-0 vote, the bill will move to the Governor's desk to be signed into law. The bill states “A bank may provide its customers with virtual currency custody services so long as the bank has 26 adequate protocols in place to effectively manage risks and comply with applicable laws.”...It also provides two rolls the bank can play. One as a fiduciary and one as a non fiduciary, both with differing requirements.
“Acting in a fiduciary capacity, the bank shall require customers to transfer their virtual currencies to the control of the bank by creating new private keys to be held by the bank.”
“In providing such services in a non fiduciary capacity, the bank shall act as a bailee, taking possession of the customer's asset for safekeeping while legal title remains with the customer, meaning that the customer retains direct control over the keys associated with their virtual currency.”
The bill continues to describe risk management rolls the bank must play, including insurance coverage and controlling relevant risk. One would think, if the bank is acting in a "fiduciary capacity" and holds the private keys to your Bitcoin, what is stopping them from selling your Bitcoin to reduce your "risk" during times of large drawdowns. This will be interesting to watch as it plays out.
Visions Federal Credit Union Partners with NYDIG to Allow Members to Buy, Hold, and Sell Bitcoin.
Visions is one of the first credit unions to allow buying, holding, and selling of Bitcoin for its customers. This feature will be only available to its NY-based mobile banking customers.
Vision’s vice president/chief digital officer, Thomas Nowak said "Consumers have spoken, and it is clear that they want to buy, sell and hold bitcoin through trusted and regulated financial institutions like Vision." adding that they "set out to make investing in bitcoin safe and convenient for our members."
Vision services 230,000 members in New York, Pennsylvania, and New Jersey...managing $5 Billion according to Bitcoin Magazine.
Credit Unions are uniquely positioned to break into the Bitcoin space. Credit Unions are beholden to their members and not their shareholders...as more and more people want access to Bitcoin, these smaller banking institutions are likely to find ways to offer the services their clients want. As of 2019, there were 5,236 credit unions in the US with 120.4 million members, and deposits of $1.22 trillion. With NYDIG and Vision leading the way, I would expect a large capital migration into the Bitcoin market from Credit Unions.