In Case You Missed It: OCC Confirms Permissible Cryptocurrency Services for Covered Banks

Earlier this month, the Office of the Comptroller of the Currency (OCC) issued a new interpretive letter (Interpretive Letter 1183) confirming the types of cryptocurrency activities national banks and federal savings associations may engage in. The new interpretive guidance is part of a change in the approach of the federal government under the Trump Administration toward supporting cryptocurrency activities through the banking sector.

New Interpretive Letter 1183 confirms the permissibility of national banks and federal savings associations to engage in the following activities related to cryptocurrency services: (i) crypto-asset custody, (ii) receiving cash reserves from the issuer of a stable coin to serve as the backing for the issued coin, and (iii) participation in independent node verification networks (such as distributed ledgers).

Previously, covered institutions seeking to engage in the above activities were required to first obtain a supervisory non-objection from the OCC and demonstrate that they have adequate controls in place before engaging in the such cryptocurrency services. Interpretive Letter 1183 rescinds this requirement, clearing the way for national banks and federal savings associations to broadly engage in these activities without the need for an effective “pre-approval” from their regulator.

While the OCC cautions that it still expects its covered institutions to have the same strong risk management controls in place to support novel banking activities, it also clarifies that the intent of the new guidance is to reduce the administrative and regulatory burden on banks seeking to support cryptocurrency activities.

Given the administration’s favorable view toward cryptocurrency services, we will be keeping an eye out for similar guidance from the other prudential regulators.

A copy of the new Interpretive Letter 1183, together with the OCC’s prior guidance on permissible cryptocurrency services is available here.