The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) released a pivotal joint statement outlining operational guidance for banks engaging in cryptocurrency custody services.
This development marks a significant step in integrating digital assets into the traditional banking system, reflecting a shift toward embracing innovation while prioritizing safety, soundness, and compliance with existing regulatory frameworks.
The guidance clarifies the responsibilities of banks holding crypto assets for customers and underscores the importance of robust risk management, offering a blueprint for financial institutions navigating the evolving digital asset landscape.
The joint statement does not introduce new rules but reaffirms that banks must adhere to existing risk management, legal, and compliance frameworks when providing crypto custody services.
These services involve safekeeping cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) for customers, either in a fiduciary or non-fiduciary capacity.
The guidance emphasizes that banks must maintain full control over the cryptographic keys associated with these assets, ensuring that no other party, including the customer, can access them while under the bank’s custody.
This requirement places full liability on the bank, reinforcing the need for stringent operational controls to mitigate risks such as theft, loss, or unauthorized access.
This regulatory update follows a series of actions by the Federal Reserve, FDIC, and OCC to ease restrictions on banks’ involvement in crypto-related activities.
Earlier, the FDIC rescinded its 2022 Financial Institution Letter (FIL-16-2022), which had required FDIC-supervised institutions to seek prior approval for crypto-related activities.
Similarly, the OCC issued Interpretive Letter 1184 earlier this year, clarifying that national banks can provide crypto custody services and outsource related activities to third parties, provided they follow proper risk management practices.
The Federal Reserve also withdrew supervisory letters from 2022 and 2023 that imposed advance notification requirements for crypto activities, signaling a more permissive approach to banks engaging with digital assets.
The guidance highlights key risk management principles that banks must apply, including compliance with the Bank Secrecy Act (BSA), anti-money laundering (AML) regulations, cybersecurity protocols, and operational resilience standards.
Banks are expected to demonstrate adequate knowledge and technical capacity to manage the complexities of crypto-asset safekeeping.
This includes implementing robust controls to address market volatility, liquidity risks, and potential cybersecurity threats.
Additionally, banks using third-party custody vendors remain fully liable for those vendors’ actions, necessitating thorough due diligence and oversight.
The regulatory shift aligns with broader efforts under the Trump administration to foster a more crypto-friendly environment.
In January 2025, President Trump signed an executive order establishing the Presidential Working Group on Digital Asset Markets to provide recommendations for federal cryptocurrency regulation.
This initiative, coupled with the withdrawal of restrictive 2023 joint statements on crypto-asset risks, reflects a recognition of the growing legitimacy of digital assets and increasing client demand for crypto-related services.
Acting FDIC Chairman Travis Hill emphasized the need to move away from past policies that effectively discouraged banks from engaging in crypto activities, stating,
“The FDIC is turning the page on the flawed approach of the past three years.”
While the guidance provides clarity, it also underscores ongoing challenges.
Questions remain about whether banks can hold crypto assets on their balance sheets or engage in activities like crypto lending.
The regulators have indicated plans to issue further guidance in the coming months, potentially addressing these ambiguities.
For now, banks are encouraged to engage proactively with their supervisory teams to ensure compliance, particularly for state-chartered institutions navigating varying state regulations.
This joint statement represents a balanced approach, promoting innovation while maintaining rigorous standards.
By clarifying the permissibility of crypto custody and emphasizing existing risk management frameworks, the Federal Reserve, FDIC, and OCC are paving the way for banks to play a central role in the digital asset economy, fostering greater trust and accessibility for consumers.
