Can US Banks Handle Customer Crypto Assets Held in Custody?
US banks are now officially allowed to handle customer crypto assets held in custody, following new guidance from the US Office of the Comptroller of the Currency (OCC).
The OCC clarified that national banks can buy and sell crypto assets on behalf of customers and outsource crypto-asset services-including custody and trade execution-to third parties, provided proper risk management practices are in place.
This marks a reversal of previous policies that required banks to seek regulatory approval before engaging in crypto activities. Banks can now offer a range of crypto-related services, such as facilitating crypto-fiat exchanges, transaction settlement, recordkeeping, valuation, tax services, and reporting.
The OCC emphasized that these activities must be conducted in a safe and sound manner, including when using sub-custodians.
This regulatory shift reflects a broader move by US banking regulators to integrate crypto into the traditional banking system, signaling a more crypto-friendly environment under the current administration.
However there are key challenges for banks offering crypto custody services.
The US regulatory landscape for digital assets remains fragmented, with varying rules and approval processes at federal and state levels. This lack of a cohesive regulatory framework makes compliance complex and increases operational risk for banks.
Ongoing ambiguity around how existing custody and customer protection rules apply to crypto assets adds further compliance challenges, especially regarding asset classification and reporting requirements.
Crypto custody demands specialized, multi-layered security measures, such as cold storage, multi-signature wallets, and advanced cybersecurity protocols. These differ significantly from traditional asset protection and require new expertise and technologies.
Banks must also implement robust disaster recovery, secure key management, and strict personnel controls to mitigate risks of theft, hacking, or operational failure.
Proper segregation between client assets and the bank’s operational funds is essential for both security and compliance. Failure to maintain clear separation can lead to regulatory breaches and loss of customer trust, as seen in past high-profile crypto failures.
Integrating crypto custody with existing banking systems is challenging, especially when acquiring or partnering with non-bank crypto firms, which often use different technologies and operate under less stringent regulations.
Banks must decide whether to build in-house solutions, partner with specialized custodians, or acquire crypto companies-each option comes with its own operational and compliance hurdles.
Crypto assets introduce new forms of risk, including illicit finance, fraud, and rapidly evolving cyber threats. Banks need tailored governance, monitoring, and risk management frameworks specifically designed for digital assets.
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