Banks in the U.S. Given Green Light to Offer Cryptocurrency Trading and Custody Services Using External Providers
Article Rewrite:
Title: Banks Can Now Provide Crypto Services: OCC's New Interpretive Letter Explained
Key Insights:
- Federal banks can offer cryptocurrency custody and execution services under customer's direction, as per the OCC's latest interpretive letter.
- Outsourcing to third-party crypto service providers is permissible, with proper risk management in place.
- Custody services may encompass trade execution, tax reporting, and fiat-crypto exchange activities.
On May 7, 2025, the U.S. Office of the Comptroller of the Currency (OCC) issued an official guidance clarifying that national banks and federal savings institutions can provide cryptocurrency custody services and execute trades for clients. This groundbreaking announcement marks a significant step in the mainstream adoption of digital assets within the traditional banking sector.
Read More: *Crypto's Future Under the Spotlight at SEC's Custody Roundtable***
Banks' Expanded Crypto Offerings
Following Interpretive Letter #1184, banks operating under federal jurisdiction can offer crypto-related services that were previously exclusive to digital asset firms. These services include buy/sell order execution and custody of digital assets, strictly in response to consumer instructions.
This confirmation refers back to previous advice, such as Interpretive Letters 1170 and 1183, which focused on the general extent of crypto custody. The OCC stresses that digital asset custody is similar to traditional custodial banking services, adjusted for the evolving landscape of digital finance.
It's worth noting that banks can operate in either fiduciary or non-fiduciary roles, depending on their relationship with the consumer. Custody of crypto assets falls under allowable banking activities as per current U.S. law.
Read More: *BlackRock Fortifies Crypto Custody and Tokenized Asset Infrastructure with Anchorage Digital***
Third-Party Providers and Sub-Custodians
Risk Management Imperative
In response to the growing need for operational flexibility, banks are permitted to transfer execution services and custody to third-party sub-custodians. For banks lacking in-house cryptocurrency infrastructure, this move expands opportunities.
However, this delegation comes with conditions: banks must exercise oversight and ensure third-party providers possess adequate internal controls. Adherence to established third-party risk management practices is crucial, especially those focused on safeguarding client assets.
Banks must continue to fulfill existing regulatory obligations under parts 9 or 150 of Title 12 of the Code of Federal Regulations when engaging in a fiduciary capacity.
Extended List of Permissible Services
Under the OCC's interpretation, the list of allowable crypto services goes beyond simple asset storage. Banks can now offer trade execution services, fiat-to-crypto and crypto-to-fiat exchange facilitation, transaction settlement, recordkeeping, valuation, tax, and reporting services.
The OCC regards these services as an extension of a bank's traditional custodial role, designed to meet the evolving demands of digital finance. Their decision aligns with legal precedents like M & M Leasing Corp. v. Seattle First Nat. Bank, where the court recognized that banking powers must adapt to technological advancements.
Impact of the New Guidance on Crypto Banking
The new guidance issues a clear message that federal regulators are working towards a more transparent framework for traditional banks to participate in the crypto ecosystem. This move may reduce the dependence of U.S. customers on standalone crypto platforms by integrating digital asset services into mainstream financial institutions.
From a compliance standpoint, banks must ensure all crypto-related activities are carried out in a secure and law-abiding manner, maintaining strict adherence to customer agreements and applicable laws. Speculative trading with customer assets is not allowed; all operations must be conducted under the customer's direction, following a service-based model.
Looking Ahead at United States' Crypto Banking Landscape
Although Interpretive Letter #1184 doesn't introduce new rules, it offers a clearer understanding of the legal scope for federally chartered banks to engage in the cryptocurrency industry. This move could spur increased interest in digital assets and intensify competition between crypto-native companies and conventional banks.
Banks can now:
- Integrate crypto custody services into their core offerings
- Forge partnerships with established crypto custodians and infrastructure providers
- Explore revenue opportunities via regulated digital asset services
With this newfound freedom, it's essential for banks to establish robust risk controls and exercise thorough operational diligence, particularly when navigating volatile crypto markets and outsourced service layers.
[5] Source: US CBS News and American Banker for additional insights.
- Based on the OCC's Interpretive Letter #1184, national banks and federal savings institutions can now provide cryptocurrency custody services and execute trades for clients, marking a significant expansion of crypto services within the traditional banking sector.
- In line with the OCC's latest guidance, banks can transfer execution services and custody to third-party sub-custodians provided they exercise appropriate oversight and ensure that these providers possess adequate internal controls.
- The OCC's interpretation extends the list of allowable crypto services beyond simple asset storage, enabling banks to offer trade execution services, fiat-to-crypto and crypto-to-fiat exchange facilitation, transaction settlement, recordkeeping, valuation, tax, and reporting services.
4.As traditional banks integrate cryptocurrency services, they must ensure all operations are carried out securely and lawfully, maintaining strict adherence to customer agreements and applicable laws while forging partnerships with established crypto custodians and infrastructure providers to explore revenue opportunities via regulated digital asset services.
