Last week, the Office of the Comptroller of the Currency (OCC) released significant updates regarding crypto banking, aiming to clarify regulations and expectations for banks involved in digital asset services. Here’s a breakdown of the key points from their latest releases:
Interpretive Letter and Withdrawals
The OCC issued an interpretive letter reinstating guidance on two critical fronts: crypto custody services and stablecoin reserves. This move effectively re-establishes the framework for banks to provide custody services for cryptocurrencies and hold reserves in stablecoins. The interpretive letter also reaffirms the use of distributed ledger technology (blockchain) for certain banking functions, aligning with previous OCC guidance.
It goes on to state, “As with any activity, banks must conduct all crypto-asset activities in a safe, sound, and fair manner and in compliance with applicable law. New activities should be developed and implemented consistent with sound risk management practices and align with banks’ overall business plans and strategies.”
Additionally, the OCC withdrew from two interagency statements issued in 2023 concerning crypto banking and liquidity risks associated with crypto assets. This withdrawal consolidates regulatory focus under the OCC’s guidance for OCC-regulated banks exclusively.
Regulatory Scope
As of now, these updates exclusively affect banks regulated by the OCC. There has been no parallel guidance from other key regulators such as the Federal Deposit Insurance Corporation (FDIC), Federal Reserve (Fed), or National Credit Union Administration (NCUA). Therefore, banks under these regulators’ purview must await further developments or clarifications specific to their regulatory frameworks.
Supervisory Expectations
Acting Comptroller Hood emphasized the importance of robust risk management controls for banks venturing into crypto-related activities. The OCC’s novel supervision team will oversee these activities closely, expecting banks to maintain the same high standards of risk management as for traditional banking operations. This scrutiny underscores the regulatory emphasis on talent and risk management structures within banks pursuing or expanding crypto services.
Looking Ahead
As the regulatory landscape evolves, it’s crucial for banks considering or currently engaged in crypto banking to stay informed and prepared. Future developments from other regulatory bodies could impact the scope and requirements of crypto-related activities across the banking sector.
Stay tuned for further updates as the regulatory environment continues to develop in this dynamic field.
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