The latest announcement from the Office of the Comptroller of the Currency (OCC) on May 13 has sent shockwaves through the financial industry. National banks are now officially allowed to partake in a variety of crypto-asset activities, marking a significant shift in regulatory stance that had previously hindered many institutions from entering the crypto space.
With the new policy in place, national banks can now offer crypto custody services, execute trades based on customer directives, and even outsource digital asset services under established third-party risk guidelines. This move, coupled with recent actions by the Federal Reserve, paves the way for traditional financial institutions to fully embrace the world of cryptocurrencies.
The OCC’s announcement, supported by Interpretive Letters 1183 and 1184, signifies a clear reversal of previous restrictions. Letter 1183, issued on March 7, revokes the 2021 supervisory “non-objection” process outlined in Letter 1179 and withdraws the OCC from two joint interagency statements made in 2023 regarding crypto-related risks. On the other hand, Letter 1184, issued on May 7, extends banks’ authority to buy and sell cryptocurrencies held in custody at the direction of clients and to utilize sub-custodians, provided that risk management frameworks align with traditional financial outsourcing standards.
These regulatory updates, along with the Federal Reserve’s decision to retract pre-approval guidance for crypto activities, signal a significant shift in the industry. The OCC believes that the U.S. banking system is now well-equipped to support digital asset activities as long as they are conducted in a safe, sound, and fair manner.
The growing market demand for cryptocurrencies is undeniable, with approximately 55 million Americans, or about 21% of the adult population, currently owning some form of digital asset. With the global crypto market cap surpassing $3.33 trillion, the opportunity for national banks to enter this space and compete for custody fees, transaction revenues, and customer retention is now more promising than ever.
Acting Comptroller Rodney E. Hood emphasized the permanence of digital financial services, stating that the digitalization of financial services is not just a trend but a transformation that is here to stay. This structural evolution signals the OCC’s intention to support the integration of cryptocurrencies within established banking models, rather than viewing it as a temporary trend.
While national banks now have federal permission to engage in crypto activities, there are still implementation challenges that need to be addressed. Compliance with anti-money laundering (AML) requirements and other supervisory expectations is paramount, but detailed guidance on areas such as private key management and capital adequacy is still lacking. It is estimated that it may take six to twelve months for major national banks to fully launch crypto services due to the integration of wallet infrastructure, AML systems, and third-party service contracts.
Additionally, the treatment of different digital assets remains uncertain, as the jurisdictional contest between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) continues. Moreover, while banks may custody crypto, the FDIC does not insure digital asset holdings, which is an important consideration for customer communications and marketing disclosures.
Overall, the regulatory shift towards a more permissive stance represents a significant milestone in U.S. banking policy on crypto. It aligns the country with adoption cycles seen in Europe and Asia, where regulated crypto services have already made their way into institutional channels. This move also addresses concerns of de-banking crypto firms and aligns with the current administration’s pro-innovation agenda.
As national banks gear up to compete in the custody and trading landscape, traditional institutions now have the opportunity to rival crypto-native firms. With customer trust in traditional banks still prevailing, incumbents could quickly gain ground in this rapidly evolving space. However, success will ultimately depend on how effectively these institutions can translate regulatory permission into operational readiness.