July 22, 2020: Banks allowed to custody crypto
Nov 11, 2020: PayPal proceeds to do it
Jan 4th, 2021: Banks can now use crypto for payments too
This means that institutions in the USA will soon move to hold Bitcoin and other crypto assets as part of their reserves, creating institutional demand for this asset class, and most likely driving up the prices.
But it will also represent an interesting “return” to a sort of gold standard. If your pension fund is going to be buying Bitcoin, why not buy it yourself? (Kind of like buying a stock market index instead of paying a hedge fund to trade for you.) This ability to have sovereign control over a
a digital asset, storing a form of value under your mattress that can’t be diluted by anyone else, is very attractive to the Austrian Economics crowd, and people who long for the time when governments couldn’t print unlimited amounts of their own currencies. That’s why they were the second wave of adopters, after the tech geeks, and now they have made fortunes "HODL"ing these crypto assets until the institutions buy them.
In a way, by embracing Bitcoin and other cryptos, banks will mean that crypto and fiat currencies will soon coexist side by side. But the question increasingly will come up for many people, why they need the banks in the first place. With DeFi and trustless, permissionless lending on blockchains, we are seeing a gradual shift from institutions to permissionless technology that empowers individuals. Just as we saw with Email, Web 1.0 and Web 2.0 - we no longer need physical infrastructure for newspapers and magazines, radio and TV stations. Anyone can deploy code and people around the world can visit their website. Perhaps soon this will happen in the world of finance, as well.