On July 22, 2020, the Office of the Comptroller of the Currency (“OCC”) published an interpretive letter clarifying that providing cryptocurrency custody services to customers is a permissible activity for national banks and federal savings associations. This letter marks an important milestone in the expansion of permissible banking activities related to digital assets. The letter concludes that cryptocurrency custody services fall within previously recognized authorities to engage in safekeeping and custody activities, and that national banks may offer these services in a fiduciary or non-fiduciary capacity. These services also include a broad range of custody-related services in relation to the cryptocurrency a national bank is custodying, including facilitating the customer’s cryptocurrency and fiat currency exchange transactions, transaction settlement, trade execution, recording keeping, valuation, tax services, reporting, or other appropriate services.
The letter follows other recent actions by Acting Comptroller of the Currency Brian Brooks to modernize the OCC’s rules and regulations for FinTechs and novel financial services activities, including publicly announcing the OCC’s intention to create a new special purpose bank charter for payments companies and requesting public comment on revisions to the regulations that dictate permissible activities for Banks. However, the letter also emphasizes that national banks must have adequate systems to identify, measure, monitor, and control the risks related to custodying cryptocurrency, and it remains to be seen how the OCC will approach new digital asset services in practice.
Our forthcoming Client Alert will provide additional analysis of the implications of the letter for national banks and current participants in the cryptocurrency space, including investment advisers, broker-dealers, and other traditional users of bank custodians, as well as the impact of the letter on evolving dynamics between state and federal regulation of crypto custody activities.