The OCC has shifted its previously hands-off stance on crypto, allowing banks to buy and sell custody-held cryptocurrencies on behalf of customers. They are also allowed to provide crypto custody services.
In a recent post, Acting Comptroller of the Currency and administrator of the federal banking system, Rodney Hood, declared that cryptocurrency is no longer simply a trend. Instead, it is considered a “transformation” by the federal agency. Therefore, the organization has decided to shift its previously skittish stance towards crypto by allowing banks to engage in financial activities related to cryptocurrencies.
“We’ve confirmed that national banks and federal saving associations may engage in certain cryptocurrency activities responsibility, in order to serve their customers,” said Hood in a video statement.
These activities include buying and selling crypto held in custody at their customer’s direction. Banks and federal saving associations are also granted the ability to outsource crypto custody and execution services to third parties. However, financial institutions must ensure these services comply with OCC’s safety standards and soundness criteria to ensure proper oversight and risk management.
Additionally, OCC-regulated banks are allowed to provide other custody services to customers such as record keeping, tax, or reporting services related to cryptocurrency.
“While a range of cryptocurrency and digital asset activities may be performed by banks and their third parties, I want to be clear that the OCC expect these activities to be conducted in a safe and sound manner and in compliance with applicable law,” said Hood.
In a document issued by the OCC on May 7, the organization clarified their stance on cryptocurrency. The letter cited that banks may act in a fiduciary capacity and a sub-custodian to provide custody services, which are subject to appropriate third-party risk management practices.
“The services national banks may provide in relation to the cryptocurrency they are custodying may include services such as facilitating the customer’s cryptocurrency and fiat currency exchange transactions, transaction settlement, trade execution, [record keeping], valuation, tax services, reporting, or other appropriate services,” wrote OCC.
The Fed, OCC, and SEC: The pro-crypto shift in banking regulations
The change in the OCC’s stance reflects a broader trend of federal organizations embracing crypto in the wake of the Trump administration friendlier stance towards the industry. Banks now have more freedom to get involved with the crypto industry following recent regulatory changes.
In late April, the U.S. Federal Reserve announced that it has removed its requirement for state banks to give a notice before participating in crypto-related activities.
Not only that, the Fed also withdrew its 2023 guidelines which limited how banks could deal with stablecoins. In addition, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, followed suit by retracting from two joint statements made that same year.
In March this year, a number crypto firms were reportedly interested in applying for banking licenses to expand their businesses and potentially reduce borrowing costs. Not to mention, a bank charter would increase their legitimacy as a business operation in the eyes of customers.
Last January, the Securities and Exchange Commission removed a rule that had forced banks holding crypto to list it as a liability, easing pressure on financial institutions.
