OCC Eliminates "Supervisory Non-Objection Process" for Certain Bank Crypto-Asset Activities
Commentary by Sebastian Souchet
The OCC rescinded prior guidance that required written notification of the supervisory office's non-objection before banks could engage in certain crypto-asset activities. New guidance reaffirmed the authority of banks to engage in these activities.
In newly issued Letter 1183 ("Addressing Certain Crypto-Asset Activities"), the OCC rescinded prior Letter 1179 ("Authority of a Bank to Engage in Certain Cryptocurrency Activities"), and confirmed that banks may continue to engage in the activities outlined in Interpretive Letter 1170 ("Cryptocurrency Custody Services"), Letter 1172 ("National Bank and Federal Savings Association Authority to Hold Stablecoin Reserves") and Letter 1174 ("National Bank and Federal Savings Association Authority to Use Independent Node Verification Networks and Stablecoins for Payment Activities").
The OCC reiterated that banks must conduct these activities in a safe and sound manner and in compliance with applicable law.
The rescission of Interpretive Letter ("IL") 1179 eliminates the supervisory nonobjection process previously required for banks engaging in these crypto-asset activities. The OCC stated that this decision is intended to reduce regulatory burden, promote responsible innovation, and ensure consistent treatment of bank activities regardless of the underlying technology.
The OCC emphasized that it will continue to supervise banks' crypto-asset activities as part of its standard oversight process. The OCC said that banks must implement appropriate risk management controls and ensure that these activities align with their broader business strategies.
Commentary
Recission of OCC Interpretive Letter 1179 is further evidence of the significant shift in federal financial regulators' approach to the crypto-asset activities of regulated institutions. Recission of IL 1179 also signals a return to the OCC's view that, for certain bank activities, prior notice to a supervisory office (or examiner-in-charge) is likely sufficient.
Recission of IL 1179 should not be construed to mean that national banks will be conducting crypto-asset activities in an unregulated or unsupervised manner. Consistent with previous OCC Interpretive Letters addressing the crypto-asset activities of national banks—for example, IL 1170, IL 1172, and IL 1174—IL 1183 explicitly states that "[a]s with any activity, banks must conduct all crypto-asset activities in a safe, sound, and fair manner and in compliance with applicable law. New activities should be developed and implemented consistent with sound risk management practices and align with banks' overall business plans and strategies." Accordingly, a national bank seeking to provide crypto-asset custody and execution services must, among other things, maintain appropriate policies and procedures and internal controls.