The new guidance also indicates a broader change in the way US regulators are thinking about crypto. On March 7, the OCC eliminated a rule that had compelled banks to obtain supervisory non-objection before making a foray into digital currencies.
Then on April 24, the Federal Reserve backtracked on its 2022 policy mandating state member banks to provide prior notice before becoming involved in crypto activities. According to Faryar Shirzad, Coinbase’s Chief Policy Officer, this new direction brings more clarity. He also credited Acting Comptroller Rodney Hood with assisting to advance it.
This explanation is based on previous guidance from the OCC, but now eliminates any uncertainty. Banks are not required to wait for special approval to provide these services, which may accelerate adoption.
The OCC guidance also establishes requirements for how banks are to deal with third-party crypto service providers. In the event that banks outsource activities such as crypto custody or transaction facilitation, due diligence needs to be conducted and oversight instituted.
Sub-custodians, especially, need to adhere to security protocols to safeguard customer assets. Banks are expected by the OCC to hold such partners to the same standards they apply in other banking segments. Risk frameworks need to be consistent with current regulations to safeguard customers from possible mishandling.
This announcement is a strong message that crypto is no longer taboo for mainstream banks. By providing banks with more latitude to engage without the need for prior approval, the OCC is signaling a more embracing attitude toward digital asset services within regulated finance.
Whether that leads to a flood of banks into the business is uncertain. But the guidelines are in place, the door is open, and customers can now choose to get crypto services from the same banks where they hold their checking accounts.
Featured image from The Information, chart from TradingView
