- Per OCC, banks might provide more secure storage services than the current crypto custodians.
- Banks that decide to try out crypto custody can offer both fiduciary and non-fiduciary services.
- The OCC also aims to introduce a reform that helps crypto startups bypass state-to-state licensing.
The Office of the Comptroller of the Currency (OCC) has granted all nationally chartered banks in the United States to offer crypto custody services. A report unveiled this news on July 22, noting that the Senior Deputy Comptroller and Senior Counsel Jonathan Gould wrote a letter that greenlights banks to hold unique cryptographic keys for a cryptocurrency. In so doing, the OCC allowed banks to hold digital assets for their clients. Prior to this development, only specific crypto custodians such as Coinbase were allowed to hold their clients’ crypto with a trusted charter from a state financial regulator.
Reportedly, the OCC addressed the letter to an unidentified bank or similar entity. The letter stated that banks might offer more secure storage services compared to the existing options. It added that both consumers and investment advisors may wish to use regulated custodians to ensure they don’t mislay their private keys, a mistake that could see them lose their assets.
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According to the letter, providing custody for cryptocurrencies would differ in several respects from other custody activities. This is because cryptocurrencies exist on the blockchain. Seeing as there isn’t physical possession of the coins, the letter noted that banks would have to obtain reliable digital wallets.
Transforming the finance sector
The letter further noted that,
“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,”
In the letter, the OCC said that banks can offer both fiduciary and non-fiduciary custodian services. However, the agency asserted that banks that seek to enter into this space should develop and implement crypto custody with sound risk management practices. On top of this, they should align their crypto activities with their overall business plans and strategies.
The letter went on to reaffirm the OCC’s position on allowing national banks to provide permissible banking services to any unlawful businesses they choose, including businesses in the crypto sector. However, the banks must effectively manage the risks involved and comply with applicable law.
Brian Brooks’ determination to boost development in the crypto sector
The OCC is currently headed by Brian Brooks, a former Coinbase executive. Brooks has been serving as Acting Comptroller since the beginning of Summer this year. In a bid to help boost development in the crypto sector, he has proposed multiple reforms that would benefit crypto firms. For instance, he proposed the introduction of a payments charter that would let crypto startups that offer financial services circumvent the state-by-state approach while acquiring money transmission licenses.