OCC Issues Interpretive Letter Rescinding Requirement That Banks Demonstrate Adequate Controls before Engaging in Certain Crypto Asset Activities

On March 7, the OCC issued Interpretive Letter 1183 rescinding Interpretive Letter 1179, which had stated that it is legally permissible for national banks and federal savings associations (collectively, “banks”) to provide cryptocurrency custody services (as described in Interpretive Letter 1170); hold dollar deposits serving as reserves to back stablecoins in certain circumstances (as described in Interpretive Letter 1172); and act as a node on a distributed ledger to verify customer payments and engage in certain stablecoin activities to facilitate payment transactions on a distributed ledger (as described in Interpretive Letter 1174); provided, however, that the bank could satisfy the relevant supervisory office that it had adequate controls in place.

To be clear, the most recent letter reaffirmed that banks may engage in these activities.  The critical change is that a bank no longer needs to engage in a supervisory non-objection process, as Interpretive Letter 1179 had required, before engaging in such activities.  Based on its staff’s supervisory experience — which has been enhanced by developing knowledge of crypto assets — the OCC concluded that the previous supervisory process is no longer necessary and its removal will “reduce burden, encourage responsible innovation, and enhance transparency.”

The OCC cautioned, however, that, as with any activity, banks must ensure that crypto asset-related activities are conducted in a safe, sound, and fair manner that complies with applicable law.  And the OCC will continue to monitor these crypto-asset related activities in accordance with its supervisory role.