The Office of the Comptroller of the Currency issued guidance Friday affirming that national banks can engage in certain cryptocurrency-related activities – rescinding a Biden-era requirement that they need to first obtain supervisory non-objection from the agency before doing so.
Interpretive Letter 1183, issued Friday, confirmed that national banks and federal savings associations are permitted to participate in crypto-asset custody, certain stablecoin activities, and independent node verification networks such as distributed ledger without having to first show they have adequate controls in place.
The banks must, however, conduct all crypto-asset activities “a safe, sound, and fair manner and in compliance with applicable law,” the OCC noted. The new activities should be built and implemented with sound risk management practices in mind, while aligning with the bank’s overall business strategies, the regulator said
“The OCC expects banks to have the same strong risk management controls in place to support novel bank activities as they do for traditional ones,” Acting Comptroller of the Currency Rodney Hood said in a statement. “Today’s action will reduce the burden on banks to engage in crypto-related activities and ensure that these bank activities are treated consistently by the OCC, regardless of the underlying technology.”
Rescinded Interpretive Letter 1179, issued in November 2021 under former President Joe Biden, restricted the authority of a bank to engage in certain crypto activities. The OCC clarified Friday that since Letter 1179 was issued, the agency has expanded its knowledge and expertise of crypto-asset activities, making the interpretive letter unnecessary.
In Friday’s notice, the OCC also withdrew its participation from 2023 joint statements on crypto-asset risks to banking organizations, and liquidity risks to banking organizations resulting from crypto-asset market vulnerabilities.
In the joint statement issued in January 2023 by the Federal Reserve, the Federal Deposit Insurance Corp. and the OCC, the agencies highlighted several key risks associated with crypto-assets and those participating in the sector, including fraud and scams, misleading representations by crypto companies, volatility in the crypto-asset market and risk management and governance practices in space lacking maturity and robustness. The agencies underscored the importance of limiting risks that could not be mitigated or controlled, affecting the banking system.
In a joint “reminder” released in a month later, the agencies cautioned against the liquidity risks brought by certain sources of funding from crypto-asset-related entities and shared some risk management practices to manage those.
Rob Nichols, CEO of the American Bankers Association, praised the OCC’s Friday letter underscoring the roles of banks in the digital asset ecosystem and their potential to change traditional financial markets.
“We applaud the OCC’s release of Interpretive Letter 1183 confirming the permissibility of national banks to provide key products and services in the digital asset market and removing the requirement for national banks to obtain supervisory non-objection before engaging in these activities,” Nichols said in a statement. “ABA has strongly advocated that these misguided policies, which created an atypical standard for many product and technology implementations, be rescinded.”
Interpretive Letter 1183 aligns with the recent crypto-friendly actions taken by the Trump administration.
President Donald Trump’s Jan. 23 executive order outlines the administration’s policies supporting growth and use of digital assets, blockchain technology and other related technologies, along with the establishment of the president’s working group on digital asset markets chaired by the special adviser for artificial intelligence and crypto.
On Feb. 5, the FDIC released 175 documents related to its supervision of banks engaged in or seeking to engage in crypto-related activities. Acting Chairman Travis Hill criticized the agency’s earlier stance related to crypto assets and blockchain, saying the FDIC’s approach has resulted in a general notion that the agency “was closed for business if institutions are interested in anything related to blockchain or distributed ledger technology.”
Hill noted the FDIC is “actively reevaluating [its] supervisory approach to crypto-related activities” and will provide a pathway for institutions looking to engage in crypto activities.
Last week, Sen. Tim Scott introduced a bill that aims to eliminate reputational risk as a metric regulators use to determine the safety and soundness of banks. Sen. Cynthia Lummis, R-WY, noted the bill’s importance in providing a transparent regulatory framework on digital assets.
“Americans deserve a transparent regulatory framework that fosters innovation in digital assets instead of smothering it with government overreach,” Lummis said in a statement Thursday.
