Unleashing the Crypto Potential for U.S. Banks
Traditional banks granted permission to manage customer cryptocurrency holdings, and even outsource these services if desired.
Get ready for a financial revolution, as U.S. national banks are now authorized to jump aboard the crypto carousel! The Office of the Comptroller of the Currency (OCC) has stepped up and given the green light for these banks to buy, sell, and manage cryptocurrencies under their care.
In a groundbreaking move, national banks can execute cryptocurrency transactions on behalf of their customers, courtesy of an interpretive letter recently issued by Acting Comptroller of the Currency Rodney E. Hood. Moreover, the OCC has allowed national banks to outsource crypto custody and trade execution services to trusted third parties.
The OCC's bold decision signals a momentous policy shift across U.S. financial regulators, echoing a more embracing approach towards digital assets under the Trump administration.
Shifting the Tides
Two weeks ago, the Federal Reserve, along with the Federal Deposit Insurance Corporation (FDIC), pulled the plug on supervisory letters that had put a chokehold on banks exploring cryptocurrency. This decision marked the end of a long-standing practice that had stifled the crypto industry's growth and reputation.
The OCC's directive builds upon an earlier milestone in July 2020, as the OCC established banks' authority to offer crypto custody services. Banks could now store clients' cryptographic keys, likening these activities to traditional banking methods[1][2].
However, this initial openness was met with a shift under the new administration, which resulted in the OCC, Federal Reserve, and FDIC requiring banks to seek written supervisory approval before engaging in crypto-related activities. This policy barrier has now been lifted with the OCC's latest guidance.
As traditional banks eye a stake in the crypto market, some critics view certain banks as being outdated, slow, and exorbitant compared to the fintech innovation driving the crypto space.
The OCC's latest affirmation mirrors its earlier Interpretive Letter 1183 from March, which confirmed the permissibility of crypto-asset custody, distributed ledger, and stablecoin activities[3][4][5]. At that time, the OCC identified these activities as "crypto-asset activities" and noted that banks could pursue them, as long as they adhered to sound risk management practices.
The FDIC followed suit later in March, with Acting Chairman Travis Hill declaring it was turning the page on the faulty approach of the past three years.
Edited by Sebastian Sinclair
Daily Debrief Newsletter
- The OCC's latest interpretive letter allows national banks in the U.S. to manage cryptocurrencies, marking a significant shift in policy.
- National banks can now execute cryptocurrency transactions and outsource custody and trade execution services to trusted third parties.
- This policy change signals a more embracing approach towards digital assets under the Trump administration.
- Two weeks ago, the Federal Reserve and FDIC ended their restrictive practices regarding banks exploring cryptocurrency.
- The OCC's directive builds upon an earlier milestone in July 2020, when it established banks' authority to offer crypto custody services.
- Critics argue that certain traditional banks may be outdated, slow, and expensive compared to fintech innovations driving the crypto space.
- The OCC's latest affirmation mirrors its earlier Interpretive Letter 1183 from March, which confirmed the permissibility of crypto-asset custody, distributed ledger, and stablecoin activities, under the condition that banks adhere to sound risk management practices.
