U.S. Regulator Gives Green Light to National Banks for Offering Cryptocurrency Custodial Services
On Wednesday, July 22, the U.S. Office of the Comptroller of the Currency made a pathbreaking announcement saying that the federal savings association and the national savings banks will be allowed to offer cryptocurrency custodial services to their customers.
This comes as a big win for the crypto community who remained optimistic and strong despite the massive regulatory pressure over the last few years. This milestone decision from the U.S. regulators will further help to bridge the gap between traditional financial institutions and the crypto markets.
So far, only regulated crypto exchange and companies with state licenses could offer these services. Now, the entry of national banks and other regulated financial institutions will create a competitive market thereby benefitting the end consumers. Ultimately, this will also push institutional participation in the crypto space.
The public letter released July 22 outlines the policy shift stating that established banks “may offer more secure storage services compared to existing options”. Besides, these regulated institutions can give customers a better assuring that consumers don’t lose access to their private keys and thus their funds.
The letter also notes that custodial services for cryptocurrencies are completely different than other custodial services. This is because since the blockchain-based Digital currencies are completely virtual in nature, there are no physical possessions involved.
Explaining the latest regulatory decision, the letter notes: “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 from the OCC also notes that banks and other regulated financial institutions offering crypto custodial services should employ necessary risk management practices which align with the banks’ “overall business plans and strategies”.
Speaking of the banks new roles, the OCC noted: “Providing custody services for cryptocurrency falls within these longstanding authorities to engage in safekeeping and custody activities. As discussed below, this is a permissible form of a traditional banking activity that national banks are authorized to perform via electronic means. Providing such services is permissible in both non-fiduciary and fiduciary capacities. A bank that provides custody for cryptocurrency in a non-fiduciary capacity would essentially provide safekeeping for the cryptographic key that allows for control and transfer of the customer's cryptocurrency.”
In the closing remarks, OCC Acting Comptroller Brian Brooks said: "From safe-deposit boxes to virtual vaults, we must ensure banks can meet the financial services needs of their customers today. 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."