It’s not only from the SEC that good news has arrived for Bitcoin and cryptocurrencies: now it’s the turn of the Fed.
In fact, it has been learned that Michael S. Barr, the vice president for supervision of the Board of the Federal Reserve, will resign.
NEW: The @federalreserve Board has announced the resignation of Michael Barr as the vice chair for supervision. Barr will remain on the board of governors.
A Warren acolyte, Barr was widely considered to be a big part of the reason why banks have been unable to engage with…
— Eleanor Terrett (@EleanorTerrett) January 6, 2025
The good news is that Barr is considered one of the main obstacles for the banks that wanted to custody or use crypto.
The resignation of Barr from the Fed: Bitcoin reacts well
Michael Barr has been vice president for supervision at the Fed since June 2022. He was appointed during the administration of Democratic President Biden and has always been an ally of Democrat Elizabeth Warren, who is the main U.S. politician fighting against the crypto sector.
His resignation will be effective starting from February 28, and at that point under the new Republican presidency of Trump, it is very likely that he will be replaced by a pro-crypto figure.
Barr will remain in office, however, as a member of the Board of Governors of the Fed, but this is less important.
The Federal Reserve is responsible for the supervision, monitoring, inspection, and examination of certain financial institutions, to ensure that they comply with the rules and regulations and operate in a safe and sound manner. Therefore, the Fed’s supervision is specifically directed at financial institutions.
A change in the Fed’s oversight could mean a significant easing of the constraints and limits imposed on US financial institutions that want to directly hold or use criptovalute.
The resignation of Barr could therefore mark a new turning point for the crypto sector, this time regarding institutional adoption by banks.
The institutional adoption of Bitcoin and the role of the Fed
In this specific case, however, an important difference must be highlighted.
Usually, institutional adoption of Bitcoin refers to the use of BTC as a form of investment by institutional investors.
Instead, in the cases concerning the supervision of the Fed, the management of Bitcoin and cryptocurrencies by banks on behalf of their clients is mainly included. In fact, if any private institution wanted to invest in BTC, it could already do so now, provided it does so with its own funds and with percentages such as not to raise the risks too much.
The problem was in the possibility for US financial institutions to provide their clients with crypto services directly, without having to rely on specialized third-party companies.
For example, institutional managers of spot Bitcoin ETFs hold the BTC in wallets of third-party institutional-level services, such as Coinbase Custody, and this limits the services that can be offered, also increasing costs.
If, on the other hand, the Fed’s supervision of financial institutions were to change strategy, it could begin to allow the same institutions to directly and personally hold, and therefore use, their cryptocurrencies, and in particular those owned by their clients.
Bitcoin in banca
What comes to mind, for example, is the possibility that banks themselves may offer their customers in the future the ability to deposit or withdraw BTC directly from their current accounts, as well as buy and sell them always directly from the current account.
As of today, in fact, this is impossible in the USA, and to tell the truth, it is also the case in many other countries. There are still very few banks around the world that offer a similar service.
Something similar is being done, for example, by PayPal, which, however, is not the classic large bank that manages thousands of billions of dollars of its clients’ funds.
For example, JPMorgan Chase has an AUM exceeding 3.4 trillion dollars, which is much more than the entire market capitalization of Bitcoin.
JPMorgan Chase already offers crypto services, but it does so by relying on third-party services, even though it has been working on its own infrastructure for some time.
At the moment when JPMorgan Chase should integrate direct crypto services within the current accounts of all their clients, that’s when we could really have “Bitcoin in banca”.
The apparent contradiction
To tell the truth, handing over your BTC to a bank seems like a total contradiction.
Bitcoin in fact was invented precisely to be able to do without the banking system, but self-custody is actually not for everyone.
Indeed, those who are truly capable of self-custody safely are still only a small part of the population. For everyone else, the only realistic alternative is to rely on a reliable custodian at least until one has gained enough confidence with the tool to also be able to do self-custody.
It is therefore indeed a contradiction that, however, has two mitigating factors.
The first is that it allows entry into the crypto sector for millions, or billions of people, who would otherwise be completely cut off.
The second is that, once you enter through this “back door,” you might then feel like entering through the main one as well, and moving everything into self-custody.
