Nationally chartered banks in the United States can now offer cryptocurrency custody services to their clients, according to a U.S regulator.
Nationally Chartered Banks Allowed to Offer Custody Services to Crypto Clients
According to the OCC (Office of the Comptroller of the Currency), all nationally chartered banks in the United States can provide custody services for digital currencies. This information was passed to the banks in a public letter dated July 22.
The Senior Deputy Comptroller and Senior Counsel Jonathan Gould stated in the letter that any national bank in the country can now save the unique cryptographic keys for a crypto wallet on behalf of its clients. This clears the way for national banks to safeguard digital assets on behalf of their customers.
The information that was contained in this letter marks a massive development for the crypto sector. In the past, custody was provided by particular companies in the industry like Coinbase. They require a state license, like a trust charter, before they can offer services to retail and institutional investors. With the announcement from the OCC, large regulated financial entities are cleared to provide similar storage services for their clients.
The OCC letter, which appears to be addressed to all the banks and similar entities, notes that they may offer additional secure storage services compared to what already exists in the industry. Furthermore, both the consumers and the investment advisors may decide to use regulated custodians to ensure that they do not lose their private keys, which in turn means access to their funds.
The letter stated that “Providing custody for cryptocurrencies would differ in several respects from other custody activities.”
A Wide Range of Crypto Services
It further pointed out the need for digital wallets, explaining that since they exist on a blockchain, the banks do not need to hold the physical cryptos. The OCC recognizes that as the financial markets move towards becoming more technological, banks and other service providers in the space need to leverage new technology and innovative ways to enable them to provide traditional services to their clients.
As such, the letter added that banks could provide both fiduciary and non-fiduciary custodian services to their customers. The OCC noted that banks offering services in the sector should create and implement those activities in line with excellent risk management practices and align them with the overall business strategies and plans of the bank.
All for Cryptos
The head of the OCC is Brian Brooks, a former executive at Coinbase. He joined the regulator earlier this year. Brooks has been serving as the Acting Comptroller since the beginning of the summer, and since his appointment, he has proposed numerous reforms that would benefit cryptocurrency companies. One of his recommendations is to allow crypto startups to bypass the state-by-state approach they go through to obtain money transmission licenses if they provide payment services.
The letter published on Wednesday reaffirms the office’s position on allowing national banks to provide permissible banking services to law-abiding businesses, including crypto companies. Banks can offer the services as long as they can effectively manage the risks and follow the rule of law.
At the moment, JPMorgan Chase is one of the national banks that offers banking services to cryptocurrency entities after taking on Coinbase and Gemini as customers earlier this year. Similar to their counterparts in Europe and other parts of the world, banks in the United States have not been open to serving the cryptocurrency sector as they see exchanges and other crypto startups as a reputational and compliance risk.