U.S. Banks Get Regulatory Nod to Buy and Sell Crypto for Customers

Banks can now buy, sell, and hold crypto for clients directly or through third parties, without pre-approval hurdles.Regulators dropped earlier restrictions, letting banks use crypto service firms if strict risk controls match banking standards.The U.S. Office of the Comptroller of the Currency (OCC) made the official announcement on Wednesday that national banks are now allowed to sell and purchase crypto assets on clients’ behalf. The evolution, made public via its new interpretive letter, provides banks with direct involvement within crypto trading.In this revised stance, banks may also outsource crypto custody and execution of trades to third-party companies. This could pave the way for deals involving specialist crypto companies, provided that the arrangements go along with risk management guidelines laid out by the regulator. The OCC stressed that whatever third-party service company is used, it has to be bound by the same standards of safety that the banks themselves have to observe.The clarification is a follow-through on the regulator’s March move to reverse its previous 2021 stance, which had necessitated banks to obtain supervisory non-objection prior to dealing with crypto business. The new stance revives the agency’s 2020 perspective, insisting that banks are empowered to undertake custody services for crypto assets without prior permission.Broader Policy Shifts Support Crypto IntegrationThe OCC’s move coincides with rigid crypto regulations during the Donald Trump presidency. The Federal Reserve last month withdrew its 2022 crypto and stablecoin guidance that instructed banks to pre-clear with regulators before engaging with those markets. That earlier guidance had imposed hurdles on institutions eyeing entry into crypto markets, requiring them to notify regulators beforehand.In parallel with the Fed, the U.S. Federal Deposit Insurance Corporation (FDIC) also revoked its earlier guidance. The FDIC made it explicit that supervised institutions may pursue legally acceptable crypto transactions without pre-clearance from the agency. Acting Chairman Travis Hill said that the move indicates the agency is turning the page on the failed strategy of the last three years.Wednesday’s OCC announcement had the effect of further affirming that banks may outsource their crypto-related activities to third-party service providers so long as those third parties are stringently regulated.“Banks must ensure sub-custodians adhere to the same risk management standards expected of the bank itself,” the OCC warned in its letter.Crypto Activities No Longer Need Pre-ApprovalAmong the most important of these changes is that banks are no longer required to file for prior approval for each separate crypto activity. Nevertheless, they are still continuously overseen and are obliged to keep detailed records demonstrating compliance with regulatory standards.Former chief legal officer at Cboe Digital and general counsel for Starkware, Katherine Kirkpatrick Bos, addressed on the social platform X:These letters signal a shift in the OCC’s approach.She noted that the agency appears to be integrating crypto more closely into mainstream banking. Bos also added that the guidance permitting third-party services “is a boon to regulated crypto native service providers.”In its interpretive letter, the OCC grouped three types of “crypto-asset activities” banks could engage in, as long as they adopt prudent risk management practices. They are custody, purchase, sale, and third-party provision for such services. The regulator explicitly stated that it is expecting no difference in accountability from banks even when they outsource tasks.