OCC Allows Banks to Buy, Sell and Custody Cryptocurrencies

The OCC has newly permitted regulated banks to buy, sell, and provide custody services for cryptocurrencies. This shift indicates a transformation in the agency’s stance on crypto following a broader trend in more accommodating federal banking regulations. National banks can now engage in these activities with a focus on safety and compliance with laws.

In a significant shift, the Office of the Comptroller of the Currency (OCC) has now opened the door for banks to engage in various cryptocurrency activities. Banks regulated by the OCC can buy, sell, and provide custody services for cryptocurrencies on behalf of their customers, marking a notable departure from the agency’s prior cautious approach.

Acting Comptroller Rodney Hood announced the change in a recent video, stating that cryptocurrency should be considered more than a fad; he referred to it as a “transformation” for the banking sector. This signals a decisive move towards integrating cryptocurrencies into mainstream banking practices, allowing for a broader range of financial services offered to customers.

According to Hood, national banks and federal savings associations can freely engage in specific cryptocurrency activities responsibly, ensuring these institutions serve their clients effectively. They can now offer services like buying and selling custody-held cryptocurrencies and even outsource custody and execution tasks to third-party providers, subject to stringent oversight from the OCC.

Moreover, these banks can provide various additional custodial services, such as record keeping, tax reporting, and other required tasks about cryptocurrency. This is a clear indication that the OCC seeks to oversee the growing intersection of traditional banking and digital assets.

Hood emphasised the importance of safety and legal compliance. He stated, “While banks can perform a range of cryptocurrency activities, it is crucial that these services adhere to safety standards and follow applicable laws to manage risks effectively. “

In a document dated May 7, the OCC elaborated on its position, clarifying that banks can act as fiduciaries and sub-custodians in cryptocurrency custody services. It laid out specific functions that banks can perform, including settling transactions and facilitating the exchange between cryptocurrency and fiat currencies. This documentation reflects a commitment to bolstering transparency and accountability in crypto transactions.

This regulatory change encapsulates a wider trend amongst federal regulatory agencies in the U.S. toward a more crypto-friendly environment. Following recent adjustments, banks are now better positioned to participate in the evolving digital asset space without the constraints that previously limited their capabilities.

In late April, for example, the U.S. Federal Reserve rescinded its requirement for state banks to provide prior notice before engaging in crypto activities, further easing regulatory burdens. Additionally, the Fed withdrew restrictive guidelines related to stablecoins while the FDIC and OCC revoked earlier joint statements made earlier this year that limited banking involvement with digital currencies.

This shake-up comes amid reports that several cryptocurrency firms are keen to secure banking licenses. It’s believed that obtaining such licenses would not only lower borrowing expenses but also enhance their business legitimacy in the eyes of consumers. Just last January, the SEC had further alleviated pressure on banks by lifting a rule that categorised crypto holdings as liabilities, paving the way for a smoother transition into the banking landscape.