Banks in US Can Now Offer Crypto Custody Services, Regulator Says

U.S. regulators have cleared the way for national banks to provide cryptocurrency custody services on behalf of customers.

AccessTimeIconJul 22, 2020 at 5:00 p.m. UTC
Updated Sep 14, 2021 at 9:34 a.m. UTC
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The Office of the Comptroller of the Currency (OCC) is letting all nationally chartered banks in the U.S. provide custody services for cryptocurrencies.

In a public letter dated July 22, Senior Deputy Comptroller and Senior Counsel Jonathan Gould wrote that any national bank can hold onto the unique cryptographic keys for a cryptocurrency wallet, clearing the way for national banks to hold digital assets for their clients.

The letter marks a major development for the crypto industry. Previously, custody was the province of specialist firms, such as Coinbase, which typically needed a state license, such as a trust charter, to offer the service to large investors. Now, large, regulated financial companies that already provide similar safekeeping services for stock certificates and the like could enter the fray.

The letter, which appears to be addressed to an unidentified bank or similar entity, notes that banks "may offer more secure storage services compared to existing options," and that both consumers and investment advisors may wish to use regulated custodians to ensure they don't lose their private keys, and therefore, access to their funds.

"Providing custody for cryptocurrencies would differ in several respects from other custody activities," the letter said.

It pointed to the need for digital wallets, adding that because they exist on a blockchain, there is no physical possession for cryptos.

"The OCC recognizes that, as the financial markets become increasingly technological, there will likely be increasing need for banks and other service providers to leverage new technology and innovative ways to provide traditional services on behalf of customers," the letter said.

Banks can provide both fiduciary and non-fiduciary custodian services, the letter said.

It also specified that banks entering the space "should develop and implement those activities consistent with sound risk management practices and align them with the bank's overall business plans and strategies."

The OCC is currently headed up by Brian Brooks, a former Coinbase exec who joined the regulator earlier this year. He's filled in as Acting Comptroller since the beginning of the summer, and has already proposed a number of reforms that would benefit crypto companies, including a national payments charter which would let crypto startups bypass the state-by-state approach in terms of acquiring money transmission licenses if they provide payment services.

Wednesday's letter also "reaffirms the OCC's position that national banks may provide permissible banking services to any lawful business they choose, including cryptocurrency businesses, so long as they effectively manage the risks and comply with applicable law."

JPMorgan Chase is one such national bank that provides banking services to crypto companies, having provided support to Gemini and Coinbase earlier this year. Like their counterparts abroad, however, banks in the U.S. have generally been skittish about serving the industry, perceiving exchanges and other startups as a reputational and compliance risk.

UPDATE (July 22, 17:45 UTC): Added context to third paragraph and at the end.

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