The U.S. Secretary of the Currency Office has announced that both the National Bank and the Federal Savings Association can engage in buying and selling cryptocurrency on behalf of clients.
This update, shared on Wednesday, builds on prior guidance and eliminates some earlier supervisory obstacles. It highlights a broader acceptance of cryptocurrency activities within the traditional banking framework.
Banks Can Provide Comprehensive Crypto Services
As per the OCC’s new interpretation, national banks are now able to carry out cryptocurrency transactions and offer related services, including asset settlement, fiat exchanges, and recordkeeping as well as tax reporting for cryptocurrencies.
These services can be delivered directly or via third-party providers. The OCC emphasized the importance of maintaining strong internal controls and sound risk management practices, especially in dealings with subcustodians.
The communication also confirms that banks are allowed to execute customer instructions when it comes to buying and selling assets they hold in custody.
Monitoring Risks in Third-Party Relationships
The latest letter from the OCC clarifies banks’ obligations when outsourcing crypto custody or execution services. Institutions need to establish due diligence processes, ensuring proper monitoring systems are in place when engaging subcustodians.
These relationships need to adhere to risk management frameworks that align with existing banking standards. Additionally, the involvement of subcustodians must guarantee the security of client assets through appropriate internal safeguards.
Changes in Regulation During the Trump Administration
This update follows significant regulatory shifts during President Donald Trump’s administration, indicating a growing willingness to embrace digital assets within the financial ecosystem.
The OCC’s March 7 communication retracted earlier requirements that mandated banks secure supervised non-denials before venturing into crypto-related activities. An announcement from the U.S. Federal Reserve on April 24 retracted guidance from 2022 that required prior notice for state member banks involved in crypto actions.
Faryar Shirzad, Chief Insurance Officer at Coinbase, acknowledged the recent regulatory changes, highlighting Rodney Hood’s contributions in clarifying these regulations.
