A major custodian bank in the US has been allowed to offer crypto services. This could pave the way for a Bitcoin bull run. In the following text, we discuss this fascinating occurrence.
Bitcoin and other cryptocurrencies have pushed for acceptance by mainstream financial institutions for some time. Yet a move by a major custodian bank could be the herald many have been waiting for. If adopted by other banks, this could lead to a Bitcoin and Ether bull run. In the following article, we discuss the changes and how they could push Bitcoin to new heights.
The Recent Wyoming Public Hearing
A public hearing in Wyoming took place last week and details came to light concerning custodian bank BNY Mellon. These were later confirmed by Bloomberg. The news was that it had received a variance from the Securities and Exchange Commission allowing it to bypass Staff Accounting Bulletin 121.
The Staff Accounting Bulletin (SAB) 21 has been a millstone around the neck of many banks who want to offer services and management for digital currencies and assets. It has demanded that they have the same amount in cash reserves as the value of the cryptocurrencies they hold for their clients. For many banks, this was just not feasible.
Who is BNY Mellon?
The Bank of New York Mellon Corporation (BNY) was formed in 2007. It was birthed from a merger between the Bank of New York and Mellon Financial Corporation. The former was created way back in 1784. This is one of the oldest banks on the planet and one of the top three in the United States of America.
Services offered by the institution include all the major bank services you would expect, such as asset management, government services management, and pension plans. With banks of this scale allowed to hold and manage cryptocurrency, it could open the door for Bitcoin and crypto to take one more step towards a traditional finance model. Essentially, these custodial services allow investors to hold crypto as an asset much more securely.
Banks can currently charge around 10 times more when they keep digital assets for a client. This makes it very profitable for banks, but less so for the customer. BNY Mellon already plays a large part in exchange-traded investments. For example, it has already been involved in a range of SEC-approved cryptocurrency services.
The New York Bit License
There have also been some suggestions that the company may push for an exemption from the New York Bit License. This regulates cryptocurrency businesses with the state of New York. The crux of the argument will be that Federal Banking Laws take precedence over state ones.
The New York Bit License came into effect in 2015. It is designed for companies or individuals who use Virtual Currency Business Activity. The first of these was highly criticized, with many feeling it was holding back crypto startups in the state. Many have said that investment managers are being discouraged from starting up businesses there and are looking elsewhere, meaning New York misses out.
The year 2020 saw changes made to make the process easier. Whether it actually did so or not is still in contention. Prospective licensees could now work with existing ones and better learn the systems and guidelines in place. However, applying for a license could cost around $100,000 with no guarantee that existing holders will want to hold the hand of potential applicants.
What Could This Signal For Cryptocurrency?
While BNY Mellon is the bank leading the charge, it is almost inevitable others will follow suit. It is another step to Bitcoin, Ether, and other cryptocurrencies becoming adopted into traditional finance methods. Some of Bitcoin’s most vocal advocates and investors have said many major US banks are already looking to follow suit.
Not all are happy about this move, particularly those die-hard adopters in the crypto community. Bitcoin was founded on the principle that it was a decentralized currency that could bypass traditional banking systems. Acceptance by financial institutions means it loses the purpose for which it was created. There have been arguments that this is possibly the reason BNY Mellon is making the move. By bringing it into the world of traditional finance, it loses its purpose and its real value diminishes.
Could Bitcoin Hit $75k?
The opposite theory is that this is heading to a Bitcoin bull run. Bitcoin is now forming a W pattern, which usually signals a shift to a positive price shift. Pushing up to new highs, if this continues it is predicted it could hit an all-time high of $75k.
Traditional financial institutions are adopting Bitcoin and cryptocurrencies, that is a fact. However, what it does to them and their value remains to be seen. For those with assets, now is the time to keep a close eye on the shifting dynamics in the market as it could go any way.