On March 7, the Office of the Comptroller of the Currency (OCC) issued a significant update regarding the involvement of national banks and federal savings associations in cryptocurrency activities. Interpretive Letter 1183 reaffirms the permissibility of various crypto-asset activities and aims to streamline the regulatory process for banks engaging in these activities.

Interpretive Letter 1183 confirms that national banks and federal savings associations can engage in the following cryptocurrency activities:

• Crypto-Asset Custody: Banks are permitted to provide custody services for crypto-assets. This includes holding and managing digital assets on behalf of customers. (Interpretive Letter #1170).
• Stablecoin Activities: Banks can hold dollar deposits that serve as reserves backing stablecoins under certain conditions. Stablecoins are digital currencies pegged to a stable asset, such as the US dollar, to minimize price volatility. (Interpretive Letter #1172).
• Participation in Independent Node Verification Networks: Banks can act as nodes on distributed ledger networks. This involves verifying and processing transactions on blockchain networks, which are decentralized and secure digital ledgers. (Interpretive Letter 1174).

One of the most notable changes in Interpretive Letter 1183 is the rescission of the requirement for OCC-supervised institutions to obtain supervisory nonobjection before engaging in the specified cryptocurrency activities. Previously, banks had to demonstrate that they had adequate controls in place and receive explicit approval from the OCC. This change is intended to reduce the regulatory burden on banks and encourage responsible innovation in the cryptocurrency space.

Acting Comptroller of the Currency Rodney E. Hood emphasized that the OCC expects banks to apply the same robust risk management controls to cryptocurrency activities as they do to traditional banking activities. The goal is to ensure that banks’ involvement in crypto-assets is conducted in a safe, sound, and fair manner, in compliance with applicable laws.

In line with the new interpretive letter, the OCC has also withdrawn its participation in two joint statements:

• Joint Statement on Crypto-Asset Risks to Banking Organizations: This statement previously highlighted the risks associated with crypto-assets for banking organizations.
• Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities: This statement addressed the liquidity risks that could arise from vulnerabilities in the crypto-asset market.

The withdrawal from these statements signifies a shift towards a more streamlined and consistent regulatory approach to cryptocurrency activities within the banking sector. And based on recent efforts by a segment of the banking industry, we can expect similar regulatory responses by other banking regulators.

Conclusion

The OCC’s issuance of Interpretive Letter 1183 marks a significant step in the evolution of cryptocurrency regulation within the federal banking system. By reaffirming the permissibility of various crypto-asset activities and streamlining the regulatory process, the OCC is paving the way for greater innovation and participation in the cryptocurrency space. At the same time, the emphasis on robust risk management and consumer protection ensures that these activities are conducted in a safe and sound manner.