Banks May Provide Safekeeping of Cryptocurrency, OCC Says

‘From safe-deposit boxes to virtual vaults, we must ensure banks can meet the financial services needs of their customers today,’ Brian Brooks, acting Comptroller of the Currency, said.


Andrew Harrer/Bloomberg News

National banks and federal savings associations in the U.S. can provide cryptocurrency custody services for customers, a federal banking regulator said in a guidance letter intended to clarify the role of traditional financial institutions in the virtual-assets market.

The Office of the Comptroller of the Currency said in an interpretive letter this week that national banks and federal savings associations are authorized to provide the services, including holding unique encoded keys associated with digital currencies, for clients.

The letter, made public Wednesday, came in response to a request from an unidentified party that asked the Treasury Department unit that supervises and regulates banks and savings associations to address the authority of a national bank to provide cryptocurrency custody services. Banks wanting to provide such services faced ambiguity around compliance in this area of cryptocurrency, experts said.

The OCC also restated its position that banks may provide permitted banking services to cryptocurrency businesses as long as the banks effectively manage risks and comply with regulations such as anti-money-laundering requirements.

Banks and savings associations have long provided safekeeping and custody services for physical and digital assets. Providing cryptocurrency custody services is a “modern form of traditional bank activities related to custody services,” the OCC said in its letter.

“From safe-deposit boxes to virtual vaults, we must ensure banks can meet the financial services needs of their customers today,” Brian Brooks, acting Comptroller of the Currency, 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.”

The OCC said in its letter that it also recognized there will be a growing need for banks and other providers of financial services to use new technology to meet customer needs as financial markets become increasingly digitized.

While the guidance didn’t represent a major policy shift, it provided added recognition of cryptocurrency from a federal banking regulator, said Ross Delston, a Washington, D.C., lawyer who advises clients on anti-money-laundering issues.

Some cryptocurrency exchanges already provide custody services for digital assets, but banks may be able to offer more security for storing cryptocurrency with so-called cold wallets, in which cryptographic keys for a particular unit of digital currency are kept on devices that are completely offline and can be stored in physical vaults, the OCC said in its letter.

The additional sense of security that banks can provide can be an important incentive for customers such as investment advisers connected with hedge funds or private-equity funds to potentially pay more to use custody services instead of similar services offered by crypto-exchanges, Mr. Delston said.

The OCC also clarified in its letter that investment advisers can manage cryptocurrencies on behalf of clients and may use national banks as custodians for the managed assets.

Write to Mengqi Sun at [email protected]

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