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OCC Permits US National Banks to Offer Crypto Custody Services

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Aug, 18 2020

Aug, 18 2020

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The US National banks are now permitted to provide custodial services for cryptocurrencies as per the new order issued by the office of the Comptroller of the Currency (OCC).

The letter issued by the OCC clarifies that the banks will now be enabled to provide fiat bank accounts and cryptocurrency custodial services to cryptocurrency enterprises.  

OCC is the authority that regulates and supervises national banks. In a letter issued on July 22, Senior Deputy Comptroller and Senior Counsel Jonathan Gould instructed that any national bank can provide permissible banking services to any lawful crypto enterprise. However, the letter does not clarify about FDIC insurance coverage to the cryptocurrencies.

With this order, large financial regulated financial institutions can provide national bank accounts and custodial services for customers’. Banks can now provide fiduciary and non-fiduciary custodian services as per this order.

Custodial Services

In this letter, the OCC has clarified the difference between the custodial services for fiat money versus cryptocurrencies. Digital currencies exist only on distributed ledger so physical existence or possession of these assets is not possible. Therefore the banks will possess cryptographic keys of the account on behalf of the customers.

Brian P Brooks, Comptroller of the Currency commented, “From safe-deposit boxes to virtual vaults, we must ensure banks can meet the financial services needs of their customers today.”

He further said, “This opinion clarifies that banks can continue satisfying their customers’ needs for safeguarding their most valuable assets which today for tens of millions of Americans includes cryptocurrency."

JP Morgan Chase is one of the national banks which has been providing banking services to the major crypto companies such as Gemini and Coinbase. However, due to the regulatory ambiguity and high risk involved with cryptocurrencies, other national banks were cautious about opening accounts for crypto enterprises. The new mandate thus has been welcomed by the crypto industry and by the financial institutions as well.

Nathan McCauley, CEO of Digital assets Custodian Anchorage commented, “The OCC letter is a positive development for the entire crypto industry. A lack of regulatory clarity has been a big roadblock to more institutional activity in crypto, and major pronouncements like this help move the needle."

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