On March 7, the OCC issued Interpretive Letter 1183 and an accompanying statement affirming prior guidance regarding whether national banks and federal savings associations may engage in cryptocurrency-related activities, including (i) providing custody services for depositors’ crypto assets, (ii) holding stablecoin “reserves,” (iii) facilitating stablecoin payments, and (iv) performing payment verification activities on blockchain networks. Importantly, the letter also rescinded the OCC’s Interpretive Letter 1179, which required banks to obtain written supervisory non-objection before engaging in these cryptocurrency activities.
What This Means for Banks
Specifically, banks are authorized to:
- Offer Crypto-Asset Custody Services: Banks are authorized to hold unique cryptographic keys associated with customers’ cryptocurrency wallets, allowing them to hold cryptocurrency products on depositors’ behalf.
- Maintain Stablecoin “Reserves”: Generally, stablecoins are a type of cryptocurrency designed to maintain a stable value. Their value is often pegged to fiat currencies, such as the U.S. dollar. Issuers of stablecoins may desire to place assets in a reserve account with a bank to provide assurance that the issuer has sufficient assets backing the stablecoin (usually on a 1:1 basis). Banks may now hold stablecoin reserves on behalf of stablecoin issuers.
- Verify Blockchain-Based Payments: Banks are authorized to participate in blockchain networks by validating, storing, and recording on-chain transactions as a form of payment processing, which includes facilitating stablecoin transactions. The OCC has stated that it views blockchain-based payment facilitation as an evolution of traditional banking functions.
The OCC also clarified that while national banks and federal savings associations may engage in these activities, they must align with sound risk management practices and ensure compliance with applicable laws, including making sure they have adequate capital and liquidity to support crypto-related operations.
Putting It Into Practice: The OCC’s statement offers insight into the new administration’s perspective on banks’ roles in the rapidly evolving crypto ecosystem and coincides with other federal regulators, including the Securities and Exchange Commission, shifting their crypto-related priorities (previously discussed here). By eliminating the requirement for supervisory non-objection, the OCC signals a shift in its regulatory approach, aiming to reduce barriers for banks exploring crypto-related services. As the regulatory landscape evolves, financial institutions should closely monitor further guidance from the OCC and other federal agencies to adapt their crypto compliance strategies accordingly.