TL;DR
- The OCC authorizes major banking institutions to custody cryptocurrencies on their balance sheets.
- Digital assets will be used to pay network fees on blockchains and for platform testing.
- The measure reverses more restrictive Biden-era policies, promoting blockchain innovation.
Last Tuesday, November 18, the Office of the Comptroller of the Currency (OCC) took a giant leap towards the convergence of traditional finance and the digital asset ecosystem. Through a public letter, the regulator confirmed that major banking institutions are officially authorized to hold cryptocurrencies on their balance sheets.
The measure allows US banks to hold digital assets for two key objectives: to pay network fees on public and private blockchains as part of their “otherwise permissible” banking activities, and to use the assets to test cryptocurrency-related platforms.
This measure aims to simplify operations for entities working with blockchain technology. Adam Cohen, Senior Deputy Comptroller Chief Counsel at the OCC, indicated that, “Permitting the bank to engage in the proposed activities enables it merely to expand… pre-existing permissible activity without having to expend resources or expose itself to operational and counterparty risks associated with acquiring the necessary crypto-assets from a third party.”
In essence, the measure transforms US banks into more efficient participants within decentralized networks.
A Shift in Cryptocurrency Regulatory Policy
This measure represents a significant change from the more cautious stance adopted during the Biden administration, when national banks had to obtain OCC approval for most cryptocurrency-related activities. At the time, regulators like the FDIC discouraged federal entities from participating in certain activities, including the use of public blockchain networks like Ethereum, considering them too risky.
The current administration is actively working to dismantle these restrictive policies. Last March, the OCC repealed the Biden-era policy that required prior regulatory approval. In addition to the recent confirmation, the regulator had previously authorized major institutions to custody digital assets for their clients and to participate in stablecoin-related activities.
The OCC’s latest letter gives US banks explicit permission to hold these assets on their balance sheets for multiple purposes. By eliminating the need to acquire these assets from third parties for each transaction, banks can now experiment more freely with blockchain technology, maintaining the digital assets necessary to operate and, thereby, driving innovation within the US financial sector.
