OCC’s Tech-Neutral Approach to Traditional Banking Activities Allows Consumers to Safely Benefit from Modernized Technologies

Withdrawing OCC Interpretive Letters would not protect investors or consumers from crypto market risks

Washington, D.C. — The Bank Policy Institute and the American Bankers Association today urged Acting Comptroller Michael Hsu to reject a recent Congressional request to withdraw the OCC’s Interpretive Letters concluding that certain activities using modernized technologies are within the scope of permissible traditional banking activities for national banks. In a letter to the agency, the trade groups said the OCC’s technology-neutral approach to permissible banking activities enables banks to meet customer demand for modernized services within the robust supervisory and regulatory framework in which banks operate.

Context: In 2020 and 2021, the OCC issued several Interpretive Letters clarifying that the following activities are merely modernized versions of permissible traditional banking activities: 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.

Recently, a letter from four senators requested that the OCC withdraw its letters, stating that “in light of recent turmoil in the crypto market…the OCC’s actions on crypto may have exposed the banking system to unnecessary risk.” 

What we’re saying: “No bank was involved in crypto trading underlying the recent volatility in the crypto market…The rescission of the Interpretive Letters would not mitigate the risks presented by nonbank crypto firms; those risks should be addressed by a comprehensive regulatory and supervisory framework applicable to those entities.”

BPI and ABA in a joint letter

The reality:

  • 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. The appropriate way to address the crypto market risks highlighted in the Congressional letter is through comprehensive regulation of nonbank crypto firms, products and exchanges that are currently largely unregulated.
  • Banks are subject to comprehensive and robust risk management, supervision and examination processes, and have substantial experience with incorporating new technologies into the business of banking. Both the public and the broader financial system benefit from banks’ involvement in the activities described in the Interpretive Letters.

Worth noting: The use of distributed ledger technology is unrelated to cryptoassets in many cases and presents none of their typical volatility, fraud or cybersecurity risks – for example, tokenized or blockchain-based deposits on a permissioned ledger or use of DLT technology for recordkeeping purposes.

Next steps: A consistent approach among federal banking regulators regarding permissible digital asset activities for banks and related risk management expectations would benefit institutions and their customers but withdrawing the letters would not advance that goal. Instead, the agencies should continue working to provide clarity on digital asset activity permissibility and risk management expectations around those activities.

To access a copy of the letter, click here.


About Bank Policy Institute.

The Bank Policy Institute (BPI) 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 small business loans, and are an engine for financial innovation and economic growth.

About the American Bankers Association

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.

About the Consumer Bankers Association

The Consumer Bankers Association represents America’s leading retail banks. We promote policies to create a stronger industry and economy. Established in 1919, CBA’s corporate member institutions account for 1.7 million jobs in America, extend roughly $4 trillion in consumer loans and provide $275 billion in small business loans annually. Follow us on Twitter @consumerbankers.

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