On July 22, 2020, the Office of the Comptroller of the Currency (OCC) issued an interpretive letter confirming that national banks and federal savings associations (banks) may provide cryptocurrency custody services to customers. The conclusion that banks may provide such services is not surprising, because banks have long provided safekeeping and custody services for a diversity of customer assets, both physical and electronic. Indeed, the OCC’s letter affirms that banks may provide permissible banking services to any lawful business they choose, provided that the banks appropriately manage risks and comply with law.
A bank’s provision of custody services may arise in nonfiduciary or fiduciary capacities. Banks providing custody services in a nonfiduciary capacity may provide safekeeping for crytpographic keys pursuant to their banking and incidental powers under 12 U.S.C. § 24 (Seventh). Those holding cryptocurrencies in a fiduciary capacity (e.g., trustee, executor, estate administrator, receiver, or investment adviser) may manage cryptocurrencies in the manner banks manage other fiduciary assets, pursuant to 12 U.S.C. § 92a, 12 C.F.R. Part 9, other applicable law, and any applicable governing instruments.
Significantly, the OCC’s letter avoided taking a position on whether cryptocurrencies may qualify as “exchange” under 12 U.S.C. § 24 Seventh), meaning that it remains an open question whether banks can own, buy, or sell cryptocurrencies for their own accounts (as opposed to their customers’ accounts).
While the OCC’s letter facially applies only to federally chartered institutions, some states have already expressly authorized their state-chartered banks to offer cryptocurrency custody services; and others provide their state-chartered banks with parity, wild card, or similar authority to engage in activities permissible for national banks.
Cryptocurrency companies interested in forming or acquiring a depository institution to provide cryptocurrency custody services to customers should be aware that there are a variety of other considerations that may impact charter choice, including the scope of proposed activities, pending litigation around the proposed OCC Fintech charter, and capital requirements. Similarly, banks interested in expanding into cryptocurrency custody services should be aware that in April 2019 the OCC issued an advanced notice of proposed rulemaking seeking public comment on whether the OCC should adopt rules regulating nonfiduciary custody services and the content of any such rules, so it is possible that the OCC could impose additional rules or requirements upon banks operating in this space.