- US banks have formal approval to offer crypto custody and execution services under law.
- Banks may work with trusted sub-custodians if they manage risk and keep assets secure.
- All crypto services must align with legal standards and follow strong internal processes.
National banks and federal savings associations can legally provide and outsource cryptocurrency custody and trading services, according to Interpretive Letter 1184 issued by the Office of the Comptroller of the Currency (OCC) recently. The letter responds to industry inquiries seeking confirmation of banks’ authority to facilitate crypto asset services under existing legal frameworks. Banks may act on customer instructions to buy or sell crypto assets, provided they comply with all applicable regulations and customer agreements.
Expanded Powers Under Existing Laws
The OCC reaffirmed that crypto custody is a modern extension of traditional banking roles. Banks can hold cryptocurrencies in fiduciary and non-fiduciary capacities and employ third-party sub-custodians, as long as risk controls are in place.
According to the OCC, such activities fall within statutory authorities, including 12 U.S.C. § 24(Seventh), 12 U.S.C. § 92a, and 12 U.S.C. § 1464. Moreover, they cited past Interpretive Letters 1170 and 1183, which laid the groundwork for allowing crypto services. Interpretive Letter 1170 noted crypto custody as a permissible activity under federal banking law.
Furthermore, banks offering these services must ensure third-party providers adhere to robust internal controls. This ensures customer digital assets remain protected against operational failures or security breaches.
Scope of Permissible Services
Banks can support a range of crypto-related functions beyond just custody. These include the execution of buy-sell orders, exchange between crypto and fiat currencies, and transaction settlements. Additionally, recordkeeping, valuation, tax services, and reporting are considered allowable under the clarified guidance.
Notably, a bank acting as custodian can engage a sub-custodian to carry out these tasks. However, they must manage third-party risks following regulatory standards. This requirement aligns with previously stated expectations in 12 C.F.R. Part 9 for national banks and Part 150 for federal savings associations. Consequently, institutions must perform these services in a manner deemed safe. Legal compliance must be upheld consistently across all operations involving digital assets.
Related: Federal Reserve Withdraws Crypto-Guidance on U.S. Banks
Will Regulatory Clarity Accelerate Institutional Adoption?
With federal guidance now explicit, will more U.S. banks enter the crypto custody space? The OCC believes existing frameworks already support modern adaptations of traditional banking services. Rodney E. Hood, Acting Comptroller of the Currency, signed the letter confirming the agency’s stance.
Citing M & M Leasing Corp. v. Seattle First Nat. Bank (563 F.2d 1377), the OCC reaffirmed that national banks may use new tools to conduct old banking functions. The clarification may pave the way for broader bank involvement in crypto markets. However, institutions must continue observing strict risk management and compliance obligations.
