Coinbase has requested federal regulators update guidance so banks can offer crypto custody and execution services directly or via third parties.
Earlier this week, Coinbase sent a letter to the Office of the Comptroller of the Currency, Federal Reserve and Federal Deposit Insurance Corporation, requesting updated guidance on crypto custody and execution services. The firm also urged the removal of what it believes are unfair banking restrictions on crypto service providers.
In a section of an announcement of the letter titled “Our Proposal for Change”, Coinbase stated: “A durable framework is key to lasting reform. Durability is only possible if banking regulators commit to establishing clear laws implemented through the democratic channel of a notice and comment period rather than interpretative guidance.
“This approach is designed to withstand changes in political administration and ensure uniform application across the industry.”
Many stakeholders in both crypto and banking have been working to integrate digital assets into the traditional banking system for some time. Such an integration would enable crypto holders to store their assets with trusted institutions.
Coinbase believes this would “create a more inclusive financial environment and strengthen overall system safety through proper oversight and integration”.
Changing tides on crypto
Crypto has been edging toward mainstream adoption for some time, but with the re-election of crypto enthusiast President Donald Trump, many in the industry believe now is the moment for full integration.
Trump is currently exploring how Bitcoin could be used to reduce the US national debt, which has surpassed $36.2trn. Efforts to advance related legislation are underway at both the federal and state levels, while Trump has tasked a federal working group with assessing how regulation around crypto can best be formulated.
Even the Fed itself, which like many other national central banks has been historically cautious around crypto, seems to be changing its tune. Jereme Powell, Chair of the Federal Reserve, recently said that banks should be free to engage with crypto clients as long as ‘they understand the risks’.
However, Trump’s political backing and changing attitudes at some of the US’ most prominent financial institutions and regulators aren’t the only factors driving the push to integrate crypto with traditional banking.
According to Coinbase, there is also a strong legal basis for reform. The company cited analyses from three prominent law firms, which argue that existing restrictions on crypto-related banking services are unlawful, stemming from flawed regulatory interpretations rather than actual legal requirements.
Coinbase concluded: “As the new Administration shapes its approach to digital asset regulation, Coinbase remains committed to constructive dialogue with regulators. We believe that clear, durable rules, established through proper democratic channels, will benefit all stakeholders – from traditional banks to crypto companies, and most importantly, the consumers we serve.”