A federal banking regulator’s resolution to let banks present crypto custody providers may have appeared out of the blue, however the company has been cryptocurrencies for years.
The Workplace of the Comptroller of the Foreign money (OCC) introduced final month that federally regulated banks may present providers to crypto startups along with custody. It seems the OCC was already leaning towards the transfer earlier than Appearing Comptroller Brian Brooks took the highest job on the company.
Certainly, the OCC has been inspecting the cryptocurrency house since at the least 2018 and certain longer, mentioned Jonathan Gould, senior deputy comptroller and chief counsel. He advised Fintech Zoom that the very act of writing an interpretive letter sometimes takes months.
“Before we actually put pen to paper that process can sometimes take a while,” he mentioned.
Learn extra: Banks in US Can Now Supply Crypto Custody Companies, Regulator Says
The OCC’s interpretative letter final month opened the door for banks to offer providers to crypto firms along with custody providers for cryptocurrencies immediately, but it surely’s unlikely that banks will instantly begin offering both service.
Quite, these letters are supposed to assist banks which can be additionally interested by crypto decide whether or not it is smart for them to start getting concerned within the house, Gould mentioned.
Banks nonetheless want to make sure they’ve correct threat administration practices and in any other case guarantee they’re ready legally to supply these providers earlier than they’ll truly achieve this.
Iterative course of
The method of making an interpretive letter sometimes begins when a bank makes a request, or the OCC sees plenty of related requests from completely different establishments.
The precise act of drafting interpretive letters can take weeks or months, Gould mentioned.
“A lot of times we just provide informal advice, meaning advice about what we think is okay, and when we do [we do] so without putting anything in writing,” he mentioned. “But sometimes we put things into these interpretive letter forms so again it’s a function of kind of the nature of the issue.”
The OCC seems to be at what number of banks are asking a few particular problem or whether or not the regulatory company itself thinks there could be a generally held query, with these components figuring out whether or not there will probably be a casual response or a proper letter.
Learn extra: ‘Inherently Borderless’: Appearing OCC Chief Talks Crypto, State Licenses and DeFi
“The kind of process to actually write an interpretive letter like this one, that doesn’t necessarily take a huge amount of time,” he mentioned. “But kind of thinking through the legal and other issues associated with an issue that can take a lot longer depending upon the complexity of the issue.”
The letter is just the start of an extended course of. The OCC will work together with banks on their subsequent steps in the event that they do determine to pursue crypto providers.
“There are a whole host of legal, regulatory and supervisory expectations that we have,” he mentioned. “Especially with new activities that involve kind of iterative and interactive dialogue with the OCC supervisors, about how XYZ activity can be done in a safe and sound fashion, whatever risks are associated when activity can be appropriately kind of managed and so forth.”
The OCC has printed greater than 1,100 letters it believes are precedential or in any other case of curiosity to most of the people.
Gould didn’t say how lengthy the OCC had been final month’s interpretive letter on crypto providers particularly, however reiterated that it may take the company weeks or months to draft a 10-page letter.
The OCC has been contemplating the authorized and supervisory questions round crypto for years, he mentioned, previous to Brooks becoming a member of the company from his earlier function at Coinbase. However Brooks has been in a position to convey particular information concerning the crypto house to the company.
“It is certainly the case, however, that because we have an Acting Comptroller who is exceptionally knowledgeable about these areas that has been hugely beneficial in terms of the agency’s thinking and understanding,” Gould mentioned.
Learn extra: Following OCC Letter, Some US Banks Seem Open to Offering Crypto Companies
Banks that are actually interested by branching out into crypto ought to attain out to their native OCC supervisors if they’ve further questions, and Gould mentioned he hopes establishments which can be crypto attain out prior to later.
“This is and will continue to be a learning process for us from a supervisory perspective and so we really need that engagement and welcome it on our end,” Gould mentioned.