American banks can legally engage in encryption asset business.

Written by: Fintax

News Overview

On May 7, 2025, the Office of the Comptroller of the Currency (OCC) in the United States explicitly stated that banks can outsource crypto activities to third parties, including custody and execution services. As long as everything still meets the safety and soundness requirements of regulators, the OCC will grant banks more freedom in cryptocurrency.

Through the issuance of Explanatory Letter No. 1183, the OCC clarifies that the National Bank and the Federal Savings Association may legally engage in cryptoasset-related business if they meet the relevant regulatory and risk management requirements. This includes activities such as providing crypto asset custody services, participating in stablecoin issuance and settlement, and participating in distributed ledger networks as nodes. The letter removes the requirement for banks to obtain written approval from the OCC in Letter 1179 issued in 2021 before conducting such operations, simplifying the process for banks to enter the cryptoasset space. In addition, the OCC has also withdrawn from previous statements on cryptoasset risks issued jointly with other regulators, showing a more open regulatory attitude towards the cryptoasset business.

FinTax Brief Review

1. The Historical Logic of Regulatory Deregulation: "Prudence-Opening-Tightening-Re-relaxation"

The regulatory game between the U.S. banking sector and crypto assets began in 2013. At that time, the Federal Reserve banned banks from directly participating in the crypto-asset business on the grounds of "vague legal attributes" and "uncontrollable systemic risks". The underlying logic behind this ban stems from a number of factors: early crypto assets such as Bitcoin were not defined as "money" or "securities" by the Uniform Commercial Code, making it impossible for banks to apply existing regulatory rules; In 2014, Mt. Gox went bankrupt due to a private key management loophole, raising regulators' concerns about the risk transmission after the banking industry intervened; Traditional financial institutions such as Visa and JPMorgan Chase have jointly lobbied Congress to try to delay the impact of crypto on existing payment and clearing systems.

In 2020, the OCC issued Interpretation Letter No. 1174 for the first time, allowing banks to provide crypto asset custody services to their customers. The direct drivers of this shift include the surge in market demand and the improvement of technical compliance: according to Grayscale's official tweet released in December of that year, the total size of crypto assets under management (AUM) reached $12.2 billion, and institutional customers represented by Grayscale have the need to relax financial regulation, forcing a series of policy adjustments; At the same time, compliant stablecoins such as USDC have partially resolved the asset transparency controversy through on-chain transparent audits and 100% fiat currency reserve mechanisms, providing more justification for crypto asset custody services.

With the change in regulatory leadership, the OCC adjusted its previous open policy in 2021: Interpretive Letter No. 1179 requires banks to submit written notice to regulators and obtain "supervisory non-objection" approval before engaging in the aforementioned cryptocurrency business. This move is seen as a tightening of the previous open policy, reflecting the regulators' concerns about the potential risks of cryptocurrency assets, especially after the collapse of crypto platforms like FTX in 2022.

In 2025, under the leadership of Deputy Director Rodney E. Hood, the OCC once again adjusted its policies to ease restrictions on banks engaging in cryptocurrency activities. Interpretive Letter No. 1183 revoked Letter No. 1179, eliminating the requirement for banks to obtain "supervisory non-objection" before engaging in cryptocurrency activities. At the same time, it reaffirmed that cryptocurrency activities, as described in Letters No. 1170, 1172, and 1174, are still considered legal provided they meet risk management and compliance requirements.

2. Applicable subjects and business scope of the new regulations

3. Applicable objects:

The OCC's interpretive letter No. 1183 clearly applies to the following two types of financial institutions: National Banks and Federal Savings Associations.

2. Scope of Business:

According to the OCC's guidance, national banks and federal savings associations may engage in cryptocurrency activities in the following three main areas:

(1) Crypto-Asset Custody Services

Banks are authorized to provide custody services for clients' digital assets, including holding private keys for cryptocurrencies. This service is viewed as a modern extension of traditional bank custody operations, requiring banks to have appropriate risk management and compliance control measures in place.

( Stablecoin Reserve Management

Banks can accept dollar deposits as reserves for stablecoins, provided that these stablecoins are pegged to a single fiat currency at a 1:1 ratio and are held in custody by the bank. This business requires banks to comply with anti-money laundering regulations and ensure the safety of customer funds.

)3( Participation in Distributed Ledger Networks

Banks are allowed to participate as nodes in distributed ledger networks (such as blockchain) to verify and record customer payment transactions. In addition, banks can use stablecoins to conduct payment transactions on the distributed ledger, which is seen as a modernization of traditional payment services.

3. Analysis of the Multidimensional Impact of the New Regulations

(1) Reshaping the banking business model

The recent easing of OCC policies means that the high walls between traditional banks and the cryptocurrency market are being broken down. Banks will no longer be limited to the role of "peripheral service providers" for crypto assets, but can truly enter core areas such as infrastructure operations, asset custody, and on-chain payment clearing.

Now that the policy has been loosened, it means that for the first time, banks have been officially "invited" by the system to enter the market, and their role is to be potential on-chain order-makers. From the perspective of infrastructure, banks are likely to lead the construction of compliant and credible on-chain payment and custody networks to replace the current dilemma of centralized platforms. From the perspective of customer structure, banks can connect with Web3 institutional funds, high-net-worth individuals, institutional investors and other high-trust funders to inject more stable incremental capital into the crypto market. From the perspective of business model, crypto custody, on-chain transaction matching, stablecoin clearing services and other businesses will become an important supplement for banks to get rid of the single dependence on net interest margin.

(2) Promotion of the unification of compliance standards

The latest requirements from OCC emphasize that any business related to crypto assets must meet "equivalent regulatory requirements." This means that the KYC/AML, operational security, and risk control systems that traditional banks are accustomed to must be transplanted into the highly heterogeneous on-chain environment. This requirement is not only aimed at the banks themselves but will also subtly change the "behavioral paradigm" of the entire crypto industry.

In the past, the industry often used "technology decentralization" as a talisman for exemption from compliance, but in the future, the equivalence of financial functions, regulatory risks, and responsible entities will become the new compliance baseline. More importantly, this change is not imposed by regulatory orders, but is spontaneously caused by banks participating in market games as "reputation nodes" within the system. In this process, the crypto industry will no longer be an "exception zone" of the law, but will become part of a consensus order governed by norms, which is where financial modernity is evolving in the context of new technologies

(3) Reconstruction of the Regulatory Coordination Model

The OCC's explanatory letter is not isolated, it is a signal that the multi-agency regulatory framework in the United States is seeking "boundary consensus". In the past few years, the U.S. crypto regulatory controversy has continued, and the SEC, CFTC, FinCEN, OCC, and Fed have set their own limits, resulting in the industry facing fundamental uncertainty about "who is the main regulator". This kind of policy fragmentation under the multi-head game not only increases the cost of compliance, but also makes financial innovation move towards risk-taking in regulatory ambiguity.

The OCC's initiative to clarify the authority of banks is actually an attempt to clarify the division of labor between institutions, and this trend has a bellwether significance for the world - the United Kingdom, the European Union, Japan and other countries are also simultaneously promoting the prudent opening of banks to the participation path of crypto assets. If a unified digital asset framework is introduced at the federal level in the future, such as the Digital Commodity Exchange Act proposed by the U.S. Congress, OCC's explanatory letters could serve as institutional precedents and operational manuals to provide an institutional basis for subsequent legislation. In this sense, the OCC's new regulations are not only "licensing", but also a shift in policy style: from suppressing technical uncertainty to embedded guidance and structural coordination.

IV. Conclusion

The OCC's confirmation of banks' legal engagement in cryptocurrency asset services marks a key step in U.S. financial regulation in the Web3 era. It is not just a policy statement, but a "signal shift" that reconstructs the boundaries of banking operations, guides the evolution of crypto compliance, and pressures the elevation of industry standards. For traditional banks, this is a ticket to enter the blue ocean of new asset services; for the cryptocurrency market, this is a milestone of being "accepted" by the mainstream financial system.