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The OCC Tells Cryptocurrency Holders to Take it to the Bank: National Banks and FSAs Can Now (Definitively) Provide Custodial Services for Cryptocurrency

On 22 July, the Office of the Comptroller of the Currency (OCC) issued an interpretive letter confirming that national banks and federal savings associations (collectively, banks) can offer custodial services for cryptoassets because “providing cryptocurrency custody services…is a modern form of traditional bank activities related to custody services.”

The OCC has long-recognized the “permissibility of electronic safekeeping activities” such as holding encryption keys for digital certificates in escrow and providing secure web-based storage of documents that contain personally identifiable information or trade secrets. Providing custody services for cryptoassets, the OCC concludes, is analogous to these activities and thus falls within banks’ long-recognized authority to offer electronic safekeeping activities.

The OCC also explains that it generally does not prohibit custody of specific assets; on the contrary, banks may custody assets if they have the capacity to do so, including hard-to-value assets. This allows banks to provide custodial services for a wide range of cryptoassets, particularly utility coins and other cryptoassets whose value is not tied to an extrinsic source.

Pursuant to this interpretation, banks may, among other services, hold a customers’ private keys, facilitate fiat and cryptocurrency exchange transactions, provide transaction settlements, maintain records, and provide tax services. Banks interested in providing such services may contract with sub-custodians, provided they adhere to existing guidance regarding oversight of third-party service providers.

To-date, many banks have refrained from offering custodial services for cryptoassets, and state-chartered trust companies have helped fill this gap.  Some states, such as Wyoming, have enacted new laws allowing special purpose depository institutions to custody such assets. The uncertainty as to whether banks could provide such services was one factor in banks’ reticence to engage. Some of the “unique issues” the OCC identified in the letter (“such as (for example) the treatment of ‘forks’ or splits in the code underlying the cryptocurrency being held”) may have been a factor as well.

With the regulatory authority question answered, banks may begin to focus more on the technical and risk factors of safekeeping services for cryptoassets. Some banks may work with existing crypto-friendly trust companies as sub-custodians, which could be critical as banks develop their capabilities.  As the OCC warned, “different cryptocurrencies may have different technical characteristics and may therefore require risk management procedures specific to that particular currency.” Moreover, interested banks may begin developing relationships with leading, regulated cryptoasset exchanges to develop their capabilities and to gauge client interest. It also remains to be seen how the letter will affect some state-chartered banks, which, under state wild card or parity statutes, generally may engage in the same activities as national banks.

Copyright 2020 K & L GatesNational Law Review, Volume X, Number 211


About this Author

Judith E. Rinearson, KL Gates, federal consumer protection lawyer, anti money laundering attorney

Judith Rinearson is a partner in the firm’s New York and London offices. Ms. Rinearson concentrates her practice in prepaid and emerging payment systems, electronic payments, crypto/virtual currencies, reward programs, ACH and check processing. She has more than 25 years of experience in the financial services industry, including 18 years at American Express’s General Counsel’s Office. Her expertise focuses particularly in the areas of emerging payments and compliance with state and federal consumer protection laws, anti-money laundering laws, state money transmitter...


Jeremy McLaughlin is an associate in the firm’s San Francisco office and a member of the Consumer Financial Service group. His practice focuses principally on regulatory compliance and government enforcement for Fintech and consumer financial products and services, with particular attention on emerging payments and compliance with state and federal consumer protection laws, state money transmitter licensing laws, and international remittances, as well as advising on privacy, data security, and PCI compliance. He represents and advises financial technology companies, internet marketplaces, and commercial and consumer lenders. He also advises clients on preemption issues. 

Daniel Cohen, KL Gates Law Firm, Washington DC, Finance Law Attorney

Daniel Cohen is a first year associate in the Washington, D.C. office.

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