The Office of the Comptroller of the Currency (OCC) in the United States has released new guidelines allowing national banks to offer cryptocurrency custody and trading services.
The announcement indicates that banks can buy and sell cryptocurrencies upon customer instructions and can outsource certain services related to these transactions to third parties. The guideline also addresses necessary risk management standards for banks to conduct cryptocurrency transactions responsibly.
Clarifying Cryptocurrencies
The published document emphasizes that banks can securely store cryptocurrencies, provide record-keeping, tax reporting, and compliance services. In this context, it is noted that crypto services for banks will expand alongside traditional financial services, enabling a more comprehensive response to customer demands. Additionally, banks must apply appropriate risk management procedures when supporting their services with third-party providers.
For years, many banks preferred to stay away from cryptocurrencies due to regulatory concerns and uncertainty, fueled by the Biden Administration’s anti-crypto policies. However, the Trump Administration’s current stance has moved beyond eliminating negative discrimination against crypto towards promoting it. Banks are now preparing to offer crypto services due to reasons such as increased revenue, product diversity, and customer demand. In the near future, we may see major U.S. banks engaging in serious competition for crypto products—an experience trillion-dollar asset managers have faced for a few years and which is now extending to banks.
Crypto Services Now Permissible
OCC’s guide mandates that banks adhere to necessary risk management practices when utilizing third-party service providers. The regulator stresses the importance of conducting cryptocurrency transactions securely, robustly, and lawfully. This requirement necessitates banks to take precautions against potential risks they may encounter during their digital transformation process.
Rodney Hood, a key figure, highlighted the transformative nature of crypto services, indicating that banks can make significant strides in this area.
Rodney Hood: “The digitization of financial services is not a fad, but a transformation.”
The guidance allows banks to buy and sell cryptocurrencies based on customer instructions and outlines regulations for recording these transactions and tax processes. This suggests that banks’ management of cryptocurrency portfolios is expected to occur within a framework similar to traditional asset management processes. Established towards the end of the 1800s, the market regulator is now officially treating cryptocurrencies as true valuable assets, marking a significant step.
Among the points emphasized by the OCC is the need for banks to prioritize security standards when offering cryptocurrency-related services. It’s crucial for banks not only to comply with legal regulations when providing crypto custody services but also to take necessary measures to protect customer assets.
With this new guidance, the OCC appears to be moving towards increasing banks’ activities in the crypto space. As the industry develops, strengthening risk management practices will enable crypto to transform into a much larger market.
The guidance serves as a strategic and risk management guide for banks offering digital asset services, with the regulatory body’s step contributing to ensuring the digital transformation in the financial sector unfolds within a framework of responsibility.