On 22 July, the Office of the Comptroller of the Currency (OCC) issued an interpretive letter confirming national banks and federal savings institutions (together, banks) can Provide custodial services for cryptoassets since “providing cryptocurrency custody services…is a modern form of traditional bank activities related to custody services.”
The OCC has long-recognized that the “permissibility of electronic safekeeping activities” for example holding encryption keys for electronic certificates in Hotmail and supplying safe web-based storage of files that include personally identifiable data or trade secrets. Supplying custody services for cryptoassets, the OCC concludes, is comparable to those actions and so falls within banks’ long-recognized ability to provide digital safekeeping activities.
The OCC also clarifies that it generally doesn’t prohibit custody of particular resources; around the contrary, banks may custody resources should they have the capability to accomplish this, such as hard-to-value assets. This enables banks to offer custodial services for a vast selection of cryptoassets, especially utility coins as well as other cryptoassets whose value isn’t tied into an extrinsic source.
Pursuant to this interpretation, banks may, one of the solutions, maintain a clients’ private keys, ease fiat and cryptocurrency exchange trades, provide trade settlements, keep records, and supply tax services. Banks considering providing such solutions may contract using sub-custodians, provided they stick to present advice regarding oversight of third party providers.
To-date, many banks have refrained from providing custodial solutions for cryptoassets, and state-chartered hope businesses have helped fill this gap. Some nations, such as Wyoming, have enacted new legislation allowing particular goal depository institutions to custody these resources. The doubt as to if banks could offer such solutions was one variable in banks’ reticence to participate. A number of those “unique issues” that the OCC identified at the correspondence (“such as (for example) the treatment of ‘forks’ or splits in the code underlying the cryptocurrency being held”) may are a factor too.
Together with the regulatory authority query replied, banks may start to concentrate more on the technical and risk factors of partitioning solutions for cryptoassets. Some banks may utilize present crypto-friendly trust firms as sub-custodians, which might be crucial as banks develop their own capacities. Since the OCC cautioned, “different cryptocurrencies may have different technical characteristics and may therefore require risk management procedures specific to that particular currency.” Furthermore, interested banks may start developing relationships with major, controlled cryptoasset exchanges to develop their capacities and to judge customer attention. Additionally, it remains to be seen the way the letter will influence several state-chartered banks, that, under country wild card or parity statutes, normally may participate in the very same activities as national banks.