OCC provides green light for banks, providing Bitcoin and cryptocurrency custody and transaction services
The Office of the Auditor General of Currency (OCC) has issued new guidance confirming that the National Bank and the Federal Savings Association can engage in crypto asset management and trade services. This clarification is in the explanatory letter 1184 outlining the possibility that banks can buy and sell digital assets under the guidance of clients and may also outsource encryption-related activities such as custody and execution services to third parties. However, banks must ensure that they implement appropriate third-party risk management practices.
The decision is important because the OCC guidance enables banks to be more active in the fast-growing cryptocurrency market, which now includes more than 50 million Americans. The OCC’s updated rules are part of its ongoing efforts to ensure that banks can responsibly engage in emerging financial technologies while protecting consumers and complying with applicable laws.
Rodney Hood, the acting chief of currency, emphasized in the video: “The digitalization of financial services is not a trend. It is a shift.” He further explained that regulated banks can provide custody services on behalf of their customers, including the secure storage and secure storage of Bitcoin and other digital assets. Additionally, “the banks we supervise can also buy and sell cryptocurrencies they hold under the guidance of their customers.”
The letter further states that banks can provide other important services such as recordkeeping, tax reporting and compliance services. The OCC also made it clear that banks can use sub-customers to provide these services, but are only “bound by appropriate third-party risk management practices.”
Rodney Hood also stressed that “While banks and their third parties can conduct a range of cryptocurrency and digital asset activities, I want to be clear that the OCC expects these activities to be carried out in a safe, reasonable way and comply with applicable laws.”
OCC’s clarification is important because it enables banks to meet the growing demand for cryptocurrency-related services while ensuring they remain secure and comply with regulatory standards. Hood stressed in the video that digital shifts not only change the way people interact with money, but also changes the entire financial landscape.
For banks, this provides an opportunity to expand their products by providing services related to digital assets as well as traditional financial services. As Hood points out, regulated banks can now help clients manage their crypto portfolios like traditional assets and provide services like tax reports and transaction records.
However, banks must ensure that they manage the risks involved in cryptocurrency custody. The OCC’s emphasis on “safe and reasonable” operations means that any crypto-related activity must be safely compliant with the law.
The OCC’s updated guidance marks an important step in integrating digital assets into a regulated financial system. With these clear rules, the National Bank can better serve its clients while ensuring that crypto-related activities are carried out responsibly and securely. For more information, visit here.
