National banks are allowed to provide cryptocurrency custody services, as well as hold unique cryptographic "keys" associated with cryptocurrency on behalf of customers, the Office of the Comptroller of the Currency (OCC) clarified Wednesday in an interpretive letter.
"From safe-deposit boxes to virtual vaults, we must ensure banks can meet the financial services needs of their customers today," Acting Comptroller Brian Brooks, who once served as chief legal officer for crypto exchange Coinbase, said in a statement. "This opinion clarifies that banks can continue satisfying their customers’ needs for safeguarding their most valuable assets, which today for tens of millions of Americans includes cryptocurrency."
Historically, banks have been wary of cryptocurrency because of fraud and money laundering concerns. The OCC's letter could help institutions become more comfortable with the sector.
"[A]s the financial markets are increasingly digitized, the need will increase for banks and other service providers to leverage new technology and innovative ways to serve their customers' needs," Jonathan Gould, the OCC's senior deputy comptroller and chief counsel, wrote to an unnamed bank that had requested information on the subject. "By doing so, banks can continue to fulfill the financial intermediation function they have historically played in providing payment, lending, and deposit services."
In the letter, the OCC also reaffirmed its position that banks may service any lawful business, including cryptocurrency businesses, so long as they manage risk and comply with the law.
The nation's largest bank, JPMorgan Chase, has reportedly approved accounts for crypto firms including Coinbase and Gemini — a step that could serve as an example to other institutions that might be on the fence regarding crypto.
Robert Norris, a managing principal at consultancy firm Capco, called the move "a major signal of credibility to the [crypto] industry."
"Other banks are going to be looking at this very carefully," he told Banking Dive in May.
Nathan McCauley, CEO of cryptocurrency custodian Anchorage, called the OCC’s letter "a positive development for the entire crypto industry."
"A lack of regulatory clarity has been a big roadblock to more institutional activity in crypto, and major pronouncements like this help move the needle," he told Forbes.
Banks that choose to provide cryptocurrency custody services "must conduct these activities in a safe and sound manner, including having adequate systems in place to identify, measure, monitor, and control the risks of its custody services," Gould wrote.
National banks should also consult with the OCC before engaging in cryptocurrency custody activities, he added.