Senators Request Acting OCC Comptroller Rescind Crypto-related Interpretive Letters

U.S. Senators Elizabeth Warren (D-MA), Richard J. Durbin (D-IL), Sheldon Whitehouse (D-RI) and Bernard Sanders (I-VT) requested that Acting OCC Comptroller Michael J. Hsu rescind the OCC's interpretive letters that permit banks to engage in crypto-related activities.

In a letter to Mr. Hsu, the Senators urged the rescission of OCC Interpretive Letters 1170, 1172 and 1174, which permitted banks to engage in certain crypto-related activities, including "providing cryptocurrency custody services for customers, holding deposits that serve as reserves for certain stablecoins, and operating independent node verifications networks. . . and stablecoins for payment activities." The Senators also requested the rescission of Interpretive Letter 1179, which affirmed that a bank could continue to engage in the activities permitted by Interpretive Letters 1170, 1172 and 1174, provided that such bank could "demonstrate, to the satisfaction of its supervisory office, that it has controls in place to conduct the activity in a safe and sound manner." The Senators asserted that the recent turmoil in the crypto market, in combination with the OCC's policies towards crypto activities, may have exposed the banking system to "unnecessary risk."

The Senators stated that the interpretive letters "essentially granted banks unfettered opportunity to engage in certain crypto activities[,]" and expressed concern that the OCC "failed to properly address the shortcomings of the preceding interpretive letters and the risks associated with crypto-related banking activities, which have grown more severe in recent months." To address the issue, the Senators encouraged the OCC to coordinate with the Federal Reserve Board and the FDIC to develop a comprehensive approach to prudential regulation of banks' cryptocurrency activities that protects consumers and maintains a sound market.

The Senators also requested that the OCC do the following, among other things, by August 24, 2022:

• provide a list of banks that have obtained permission to engage in crypto-related activities since the issuance of the interpretive letters, and specify the activities each bank has been approved to engage in and the approximate dollar volume of such activities;

• provide information as to whether the OCC has denied any bank's request to engage in crypto-related activities;

• provide information about OCC-regulated banks currently engaged in (i) providing crypto custody services; (ii) holding dollar deposits that are reserves backing stablecoins; (iii) serving as nodes to verify customer payments; and (iv) facilitating transactions involving stablecoin payments, including the number and names of such OCC-regulated banks; and

• provide certain information as to whether OCC-regulated banks are engaging in other crypto-related activities, including lending of crypto assets or trading crypto assets or crypto derivatives.