Hoosier Banker partner, such as their bank, to better understand how. In addition to offering education, allowing customers to try their hand in the crypto space could generate additional revenue. What Do the Regulators Say? As the space evolves, regulations governing digital currencies are updated on an ongoing basis. Financial institutions should stay up to date on regulations and instructions from federal regulators regarding decentralized cryptocurrencies. Recent guidance from the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency has focused on the need for greater clarity, with tentative guidance around: • Crypto-asset custody. • Facilitation of customer purchases and sales of crypto assets. • Loans collateralized by crypto assets. • Activities involving payments. • Activities that may result in crypto asset holding on an institution’s balance sheet. Institutions should look for additional clarity from the agencies to best understand policies, potential gray areas and what might come next. Looking ahead, it’s wise to keep an eye on the Federal Reserve and additional regulatory changes. Keep in mind that while there may be risk in emerging spaces, inaction could pose risk as well. What is Crypto Custodial Management? Bankers needn’t worry about the ins and outs of crypto to offer custodial management services. Banks can simply become channels through which customers engage. A bank’s role in working with a custodial management system is to remove some of the risks and act as a trusted vault of information. The implications are straightforward: • A bank partners with a technology provider to offer Bitcoin wallets through digital banking. • Customers buy, sell and hold Bitcoin as an asset rather than currency. • Banks generate fee revenue, gaining a certain percentage for each transaction amount. • The technology partner facilitates tax filings and offers downloadable tax forms. Effective custodial management uses best practices to safeguard crypto assets and the keys to access them. These safeguards require avoiding hot wallets, whose keys are still connected to the internet and therefore vulnerable. Another best practice is breaking keys into parts so that no one person has access. MARY ALICE AVERY mavery@wilmingtontrust.com 302.636.6127 MINDY WALSER mwalser@wilmingtontrust.com 702.866.2203 Trustee Services for Senior and Subordinated Debt and Trust Preferred Securities Investment Subsidiaries and Holding Companies Custody Portfolio Accounting Investment Management ©2020 Wilmington Trust Corporation and its affiliates. All rights reserved. Wilmington Trust is a registered service mark. Wilmington Trust Corporation is a wholly owned subsidiary of M&T Bank Corporation (M&T). 43300-A 200218 VF ENTITY MANAGEMENT DELAWARE AND NEVADA EXPERIENCE The adoption of digital banking, bank apps and self-service options shows that financial institutions can adapt to new trends in technology. Banks must now continue to innovate to meet consumer needs in an increasingly competitive landscape.This space deserves continued attention by all financial institutions, and it is time to craft a strategy before someone else does it for you. HB
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