BPI and ABA Respond to OCC Interpretive Letters on the Use of Modern Technologies in Traditional Banking

Dear Acting Comptroller Hsu:

The Bank Policy Institute1 and the American Bankers Association2 are writing regarding the letter dated August 10, 2022, to you from Senators Warren, Durbin, Sanders, and Whitehouse addressing the OCC’s Interpretive Letters authorizing banks to engage in certain traditional banking activities using modernized technologies.3 These Interpretive Letters, issued pursuant to the OCC’s authority to administer and interpret the National Bank Act, concluded that the following activities were within the scope of permissible traditional banking activities for national banks: providing certain cryptocurrency custody services on behalf of customers, including by holding the unique cryptographic keys associated with cryptocurrency; holding deposits that serve as reserves for stablecoins that are backed on a 1:1 basis by a single fiat currency and held in hosted wallets; and using distributed ledgers and buying, selling, and issuing stablecoins to engage in and facilitate payment activities.4 In each case, the OCC sensibly determined that the activity was simply a modernized version of a traditional banking activity and thereby permissible for banks.

The Congressional letter states that in light of the “recent turmoil in the crypto market,” “the OCC’s actions on crypto may have exposed the banking system to unnecessary risk” and asks that you withdraw “existing interpretive letters that have permitted banks to engage in certain crypto-related activities.” However, the recent events in the crypto market were wholly unrelated to banks’ involvement in the traditional banking activities described in the OCC Interpretive Letters. Thus, their rescission would not enhance the protections of bank investors, consumers, or the financial system in connection with cryptocurrency activities.5 Rather, rescinding those letters would serve only to undermine banks’ ability to leverage modernized technologies to bring traditional banking products and services to customers in more reliable, safer and more efficient ways.

Additionally, while we agree that the activities of largely unregulated nonbank crypto firms present meaningful and various risks (including the risk of consumer and investor harm), the conclusion that the OCC’s Interpretive Letters must be rescinded to address these risks is inapposite. The withdrawal of those letters is not warranted, nor would such withdrawal achieve the goal of imposing “stronger protections . . . to mitigate crypto’s risks to the financial system and consumers.”

To read the full comment letter, click here, or click on the download button below.

[1] The Bank Policy Institute is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s bank-originated small business loans, and are an engine for financial innovation and economic growth.

[2] The American Bankers Association is the voice of the nation’s $24 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $19.9 trillion in deposits and extend $11.4 trillion in loans.

[3] Letter from Senators Warren, Durbin, Whitehouse, and Sanders to Acting Comptroller of the Currency, Michael J. Hsu (August 10, 2022), available at: 2022.08.10 Letter to OCC re crypto guidance.pdf (senate.gov).

[4] OCC Interpretive Letter #1170 (July 22, 2020), available at: Interpretive Letter 1170, Authority of a National Bank to Provide Cryptocurrency Custody Services for Customers (occ.gov); OCC Interpretive Letter # 1172 (September 21, 2020), available at: Interpretive Letter #1172 OCC Chief Counsel’s Interpretation on National Bank and Federal Savings Association Authority to Hold Stablecoin Reserves; OCC Interpretive Letter # 1174 (January 4, 2021), available at: Microsoft Word – Interpretive Letter #1174 -Crypto 1 INVN Stablecoin Letter (occ.gov).

[5] Moreover, such rescission would conflict with the principle of tech neutrality recently endorsed by Treasury Secretary Yellen regarding the regulation of digital and crypto assets and activities. Remarks from Secretary of the Treasury Janet L. Yellen at American University’s Kogod School of Business Center for Innovation (April 7, 2022), available at: Remarks from Secretary of the Treasury Janet L. Yellen on Digital Assets | U.S. Department of the Treasury.