Supervisory ‘non-objection’ required before a bank can engage in crypto activities, new OCC letter clarifies

An interpretive letter aimed at clarifying the prior requirements for national banks and federal savings associations interested in engaging in certain cryptocurrency, distributed ledger, and stablecoin activities was released Tuesday by the Office of the Comptroller of the Currency (OCC).

OCC Interpretive Letter #1179, from the agency chief counsel’s office, is the product of the agency’s review of past interpretive letters – issued in 2020 and 2021 – regarding banks’ crypto activities. The OCC said in Tuesday’s release that the activities addressed in those earlier letters (#1170, on cryptocurrency custody services; #1172, on dollar deposits backing stablecoin; and #1174, on node verification networks) may be conducted “after a bank notifies its supervisory office in writing of its intent to engage in the activities, and after a bank receives written notification of the supervisory office’s non-objection.” It emphasized that a bank should not engage in the activity until it receives the non-objection.

Letter #1179 states that in deciding whether to grant supervisory non-objection, the office “will evaluate the adequacy of the bank’s risk management systems and controls, and risk measurement systems, to enable the bank to engage in the proposed activities in a safe and sound manner.”

Acting Comptroller of the Currency Michael Hsu said Tuesday’s letter “reaffirms the primacy of safety and soundness.” He said the clarity provided in the letter “will help ensure that these cryptocurrency, distributed ledger, and stablecoin activities will be conducted by national banks and federal savings associations in a safe and sound manner.”

The new interpretive letter (addressed as well in a bulletin the same day) also reiterates that OCC Interpretive Letter #1176 on the OCC’s chartering authority did not expand on or change a bank’s existing obligations under the OCC’s fiduciary activities regulations. “The OCC retains discretion in determining whether an activity is conducted in a fiduciary capacity for purposes of federal law,” it said.