American investment banking stalwart Goldman Sachs has lined up behind JP Morgan Chase bank to begin offering crypto custodial services to its clients
The bank is yet to make any official announcement about its new product. However, sources inside the bank told BlocDesk that the bank has issued a request for information (RFI) to explore digital asset custody.
The source went ahead to reveal that the bank’s break into the crypto industry was “part of a broad digital strategy,” citing stablecoins in relation to recent missives from the U.S. Office of the Comptroller of the Currency (OCC).
Before now, the conversation around Goldman Sachs offering something akin to prime brokerage services involving crypto was being talked about. Since it is clear the firm is coming into crypto, the source explained that the bank is looking at custody but not prime brokerage.
What difference would Goldman Sachs bring to crypto custodial services?
Due to several unique challenges that safely store crypto assets, investors prefer that their cryptos are kept safe by professionals instead of storing the digital assets themselves.
Amidst this, more risk-averse investors will be more comfortable allocating some of their capital to cryptocurrency following the entry of firms like Goldman Sachs. This is especially as the Office of the Comptroller of the Currency (OCC) recently granted conditional approval for a national trust bank charter to cryptocurrency company Anchorage, one of the biggest cryptocurrency custodians in the industry.
Major banks are also creating their solutions for crypto custody, which would be easy for Goldman to key into. In light of this, Spanish bank BBVA is reportedly working on launching a cryptocurrency custody and trading service. At the same time, Standard Chartered has partnered with Northern Trust to establish Zodia, an institutional-grade cryptocurrency custody solution.
Unpopular news: why Goldman Sachs, JP Morgan are eligible for custody services
Previously, it was illegal for U.S. banks to offer custodial services for crypto assets until July 2020. The OCC issued a public letter clarifying that national banks and federal savings associations are legally permitted to have custody of cryptocurrency assets.
It was reported back then that the letter also enabled banks to offer more exotic services”, including staking and cryptocurrency lending.
Regarding custody, the letter said that “national banks have long provided safekeeping and custody services for a wide variety of customer assets, including both physical objects and electronic assets.”
“…The OCC concludes…that providing cryptocurrency custody services, including holding the unique cryptographic keys associated with cryptocurrency, is a modern form of these traditional bank activities.”