Cryptocurrency Gradually Institutionalizing

U.S. regulators studying feasibility of banks to act as a custodian of cryptocurrency

U.S. bank regulators are studying the feasibility of banks to hold crypto in their balance sheets to act as a custodian and facilitate client trading.

The Chair of the Federal Deposit Insurance Corp. (FDIC), Jelena McWilliams in an interview with Reuters said banks are needed to be allowed to get involved in crypto. He also noted, “If we don’t bring this activity inside the banks, it is going to develop outside of the banks; the federal regulators won’t be able to regulate it.”

The latest development reflects U.S. regulator’s gradual interest in further institutionalizing the cryptocurrency market.

In May this year at an event McWilliams said, her agency wants to hear from banks on their approach to crypto and on what aspects they would want regulators to play their part.

McWillams also told Reuters, “My goal in this interagency group is to basically provide a path for banks to be able to act as a custodian of these assets, use crypto assets, digital assets as some form of collateral,”.

His comments should add to price sentiment of the overall cryptocurrency market since the crypto community generally interprets any regulatory credibility as a bullish run.

However, Bitcoin on the hand after a bullish run on the exchange launch of ProShares Bitcoin ETF (BITO) pullbacks to $58,940 amid extreme optimism, leverage and profit taking sentiment, according to Coindesk.

Charlie Silver, co-founder of Blockforce Capital said to Coindesk, “Once investors realize that these futures ETFs create no new demand for BTC and are only a side bet on short-term price appreciation we may see significant price erosion,”.

The fundamental of ETF BITO is to track performance of Bitcoin, however the fund’s return is falling short of the performance of the underlying. BITO is also underperforming the performance of Grayscale Bitcoin Trust.

Trader are uncertain about Bitcoin’s short term direction reflected by traders bagging in profits after record rally driven by the ETF run.

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