US Banks Can Now Offer Crypto and Stablecoin Services Under New Rules

The Office of the Comptroller of the Currency (OCC) has issued new guidance, allowing national banks and federal savings associations to offer crypto custody and stablecoin services without prior regulatory approval.

It marks a significant development for the cryptocurrency sector, following calls to end restrictive banking practices like Operation Choke Point 2.0.

OCC Clears the Way for Banks and Crypto

The latest directive, Interpretive Letter 1183, confirms that banks can engage in these activities under existing banking laws. This eliminates the previous requirement to obtain supervisory non-objection before proceeding.

The new guidance marks a major shift in regulatory policy, streamlining the process for banks to integrate digital assets into their services. Nevertheless, the OCC emphasized that while the approval requirement has been lifted, banks must maintain strong risk management controls akin to those required for traditional banking operations.

“The OCC expects banks to have the same strong risk management controls in place to support novel bank activities as they do for traditional ones,” said Rodney E. Hood, the acting Comptroller of the Currency.  

He added that this decision reduces barriers for banks seeking crypto-related activities. It marks a significant development after legal redress and pushback against unfair regulations from industry executives like Brian Armstrong.

Recently, the Coinbase CEO sued the FDIC (Federal Deposit Insurance Corporation) for trying to sever ties between the banking and crypto sectors.

Key players in the crypto industry, including Circle CEO Jeremy Allaire, have enthusiastically welcomed the OCC’s announcement.

“Let’s go! Banks using USDC. Coming soon to a blockchain near you. We are excited about wiring up the existing financial system to the new Internet financial system. Circle Mint is open for business,” expressed Allaire.

Meanwhile, others, like crypto analyst Marty Party, highlighted the decision’s economic impact. He said the milestone would allow US banks to serve as validators on public networks, custody crypto for customers, and hold stablecoin.

Similarly, popular crypto analyst Scott Melker, aka The Wolf of All Streets, lauded the OCC’s reaffirmation that crypto activities are fully permissible in the US federal banking system.

Of note, the Bank of America (BoA) recently committed to launching a stablecoin if new US regulations allow.

Perhaps, with the latest regulatory breakthrough, the BoA could follow through on this commitment, following others like Ripple in the stablecoin market.  

Custodia Bank CEO Says Not Necessarily A Green Light

Despite widespread excitement, some industry experts have urged caution. Custodia Bank founder and CEO Caitlin Long pointed out that while the OCC’s guidance is a positive step, broader regulatory obstacles remain.

“Wish it were so, but we’re not quite there yet—here’s why. There are nuances to US bank regulation,” she wrote.  

The Custodia Bank executive indicated that anti-crypto guidance from the Federal Reserve (Fed) and FDIC remains in effect. She said this continues to create hurdles for banks that wish to adopt digital asset services fully.

“Amid all the jubilation about the OCC news, Operation Choke Point 2.0 isn’t over until: 1. Fed FDIC also rescind their anti-crypto guidance, which is still in effect, and 2. Custodia Bank has its Fed master account,” Long explained.

In hindsight, early in 2023, Custodia Bank was denied a master account, which would give it access to the Fed’s liquidity facilities. Based on this, her stance is that the Fed and FDIC were far more detrimental to crypto banking than the OCC.

Ben El-Baz, a founding member of HashKey Group, offered a more optimistic perspective. He suggested that the OCC’s decision could pressure the Fed and FDIC to follow suit.

“On a more optimistic note, it is possible that the OCC as a first mover helps push along subsequent aligned guidance from FDIC and the Fed. Having one institution move forward is better than none,” Baz opined.

Nonetheless, it is a positive development in the right direction, but it might take some time for banks to fully embrace these changes.