The Office of the Comptroller of the Currency (OCC), the leading regulatory overseeing national banks, has issued a letter confirming that national banks and federal savings associations can engage in crypto but must demonstrate adequate controls in place before they can engage in certain cryptocurrency, distributed ledger, and stablecoin activities.
In 2020 and 2021, the OCC issued several interpretive letters, including 1170, 1172, and 1174.
After taking office earlier this year, Acting Comptroller Michael J. Hsu announced a review of these letters. Today Hsu is clarifying that the activities addressed in the previous interpretive letters may be conducted after a bank notifies its supervisory office of its intent to engage in the activities, and after a bank receives written notification of the supervisory office’s non-objection. The OCC states that a bank should not engage in the activity until it receives a non-objection from its supervisory office.
Acting Comptroller Hsu commented on the letter:
“Today’s letter reaffirms the primacy of safety and soundness. Providing this clarity will help ensure that these cryptocurrency, distributed ledger, and stablecoin activities will be conducted by national banks and federal savings associations in a safe and sound manner. Because many of these technologies and products present novel risks, banks must be able to demonstrate that they have appropriate risk management systems and controls in place to conduct them safely. This will provide assurance that crypto-asset activities taking place inside of the federal regulatory perimeter are being conducted responsibly.”
Today’s letter also reiterates that OCC Interpretive Letter 1176 on the OCC’s chartering authority does not expand on or change a bank’s existing obligations under the OCC’s fiduciary activities regulations. The OCC states that it retains discretion in determining whether an activity is conducted in a fiduciary capacity for purposes of federal law.
The letter provides a roadmap for banks to engage with their supervisory office to provide written notification of their proposed activities and outlines the criteria that the OCC will follow to evaluate the proposed activity and provide a supervisory non-objection. If the bank receives a supervisory non-objection, the OCC will review these activities as part of its ordinary supervisory processes.
Simultaneously, the US Federal Reserve, OCC, and the FDIC have issued a Joint Statement on Crypto-Asset Policy Sprint Initiative and Next Steps.
The statement “recognize(s) that the emerging crypto-asset sector presents potential opportunities and risks for banking organizations, their customers, and the overall financial system. As supervised institutions seek to engage in crypto-asset-related activities, it is important that the agencies provide coordinated and timely clarity where appropriate to promote safety and soundness, consumer protection, and compliance with applicable laws and regulations, including anti-money laundering and illicit finance statutes and rules.”
Next steps include greater clarification on certain activities involving crypto including custody, sales and purchase, collateralized crypto loans, stablecoins and holding crypto on balances sheets.
Without providing a specific timeline, the federal agencies will be addressing these issues throughout 2022.