U.S. Banks Can Legally Engage in Crypto Asset Activities
News Overview On May 7, 2025, the U.S. Office of the Comptroller of the Currency (OCC) clarified that banks can outsource crypto-related activities to third parties, including custody and execution services. A…
News Overview
On May 7, 2025, the U.S. Office of the Comptroller of the Currency (OCC) clarified that banks can outsource crypto-related activities to third parties, including custody and execution services. As long as these operations continue to meet the regulator’s safety and soundness requirements, the OCC will grant banks greater freedom to operate in the crypto space.
The OCC made this statement through Interpretive Letter No. 1183, which clearly states that national banks and federal savings associations are legally allowed to engage in crypto-related activities—so long as they meet the applicable regulations and risk management standards. These activities include providing custody services for crypto assets, participating in the issuance and settlement of stablecoins, and acting as nodes in distributed ledger networks. This letter revokes the requirement in Interpretive Letter No. 1179 (issued in 2021) that banks must obtain written approval from the OCC before engaging in such activities, thereby streamlining the entry process for banks into the crypto world. Additionally, the OCC withdrew from a previously issued joint statement with other regulators concerning crypto asset risks—signaling a more open regulatory stance toward crypto operations.
FinTax Commentary
1. The Historical Cycle of Regulation: “Cautious — Open — Restrictive — Open Again”
The tug-of-war between U.S. banks and crypto regulations started back in 2013. At the time, the Federal Reserve prohibited banks from directly engaging in crypto asset operations, citing “unclear legal attributes” and “uncontrollable systemic risks.” The rationale behind this ban was multifaceted: early cryptocurrencies like Bitcoin weren’t recognized as “money” or “securities” under the Uniform Commercial Code (UCC), making it hard to apply existing regulatory rules; the 2014 collapse of Mt. Gox due to private key management failures heightened regulators’ concerns about risk transmission once banks entered the space; and traditional financial institutions like Visa and JPMorgan even lobbied Congress to slow down the disruption crypto posed to the current payment infrastructure.
In 2020, the OCC issued Interpretive Letter No. 1174, which marked the first wave of regulatory easing by allowing banks to provide crypto custody services. This pivot was driven by two forces: surging market demand and improved tech compliance. According to a December 2020 tweet from Grayscale, its crypto Assets Under Management (AUM) had reached $12.2 billion. Institutions like Grayscale needed looser financial regulations, pushing for policy adjustments. At the same time, compliant stablecoins like USDC adopted on-chain transparent audits and 100% fiat reserves, resolving some concerns about asset transparency and offering more legitimacy to crypto custody services.
With a change in regulatory leadership, the OCC in 2021 revised its previously open stance. Interpretive Letter No. 1179 required banks to submit written notice and obtain a “non-objection” from regulators before engaging in crypto-related activities. This move was seen as a tightening of earlier policies, reflecting the regulator’s increased concerns about crypto risks—especially following collapses of platforms like FTX in 2022.
In 2025, under Acting Comptroller Rodney E. Hood, the OCC again relaxed its approach, lifting restrictions on banks’ involvement in crypto. Interpretive Letter No. 1183 revoked Letter No. 1179, removing the requirement to obtain a “non-objection” before operating in the crypto asset space. It also reaffirmed the legality of crypto activities outlined in previous letters 1170, 1172, and 1174, provided that banks meet risk management and compliance obligations.
2. Scope of the New Rules: Applicable Entities and Business Areas
Who It Applies To:
Interpretive Letter No. 1183 is specifically applicable to two types of financial institutions: National Banks and Federal Savings Associations.
Business Scope:
According to OCC guidance, National Banks and Federal Savings Associations may engage in the following three primary areas of crypto activity:
Crypto-Asset Custody Services
Banks are authorized to provide crypto custody services to clients, including safekeeping private keys of cryptocurrencies. This is considered a modern extension of traditional custodial banking services and requires proper risk management and compliance frameworks.
Stablecoin Reserve Management
Banks may accept U.S. dollar deposits as reserves for stablecoins, as long as those stablecoins are backed 1:1 by a single fiat currency and are custodied by the bank. This operation mandates banks to comply with anti-money laundering laws and ensure the safety of customer funds.
Participation in Distributed Ledger Networks
Banks are allowed to act as nodes in distributed ledger networks (like blockchains) to validate and record client payment transactions. They can also use stablecoins to facilitate payments on these ledgers, which is seen as a modern form of traditional payment services.
3. Multidimensional Impact Analysis of the New Rule
(1) Reshaping the Banking Business Model
The OCC’s policy shift means the wall between traditional banks and the crypto market is coming down. Banks are no longer just on the sidelines of crypto—they can now participate in core activities like infrastructure operations, asset custody, and on-chain payment settlements.
This policy loosening essentially gives banks a formal “invitation” to enter the crypto space, positioning them as potential rule-setters on-chain. From an infrastructure standpoint, banks may lead the creation of compliant and trusted payment and custody networks to replace today’s centralized platforms that often implode. From a client perspective, banks can now serve Web3 Participants, high-net-worth individuals, and institutional investors—injecting the crypto market with more stable capital. And in terms of business model, services like crypto custody, on-chain trade matching, and stablecoin settlements could become important supplements to banks' traditional interest-margin-based revenue.
(2) Promoting Unified Compliance Standards
The OCC now emphasizes that any crypto-related business must meet “equivalent regulatory standards.” This means that traditional bank practices like KYC/AML, operational security, and risk control must now be embedded in the highly decentralized on-chain world. And this doesn’t just apply to the banks—it will quietly reshape the entire crypto industry’s “behavioral norms.”
In the past, the crypto world often used “technological decentralization” as a shield to avoid compliance. But going forward, equivalence in financial function, regulatory risk, and responsible parties will become the new compliance baseline. More importantly, this shift isn’t being forced through regulation—it’s emerging organically as banks become “trusted nodes” in the system and enter the crypto market. As this evolves, the crypto world will no longer be a “legal gray zone” but a part of the rule-based consensus order—this is the direction financial modernity is taking in the context of new technology.
(3) Restructuring Regulatory Coordination
The OCC’s letter isn’t a one-off. It’s a signal that the U.S.’s multi-agency regulatory framework is trying to find “consensus boundaries.” Over the past few years, crypto regulation in the U.S. has been messy—SEC, CFTC, FinCEN, OCC, and the Fed each drawing their own lines. This led to industry-wide confusion about who’s really in charge, driving up compliance costs and making financial innovation riskier in the face of regulatory uncertainty.
Now, by proactively clarifying banks’ crypto permissions, the OCC is testing out a model of clearer institutional division of labor. This has global implications: the UK, EU, Japan, and others are also cautiously opening pathways for banks to engage with crypto assets. If the U.S. eventually passes a federal digital asset framework—like the proposed Digital Commodity Exchange Act—this kind of interpretive letter could serve as both precedent and operating manual. In that sense, the OCC’s new policy is more than just a “permission slip.” It’s a shift in policy style—from suppressing technological uncertainty to embedding and structurally guiding it.
Conclusion
The OCC’s confirmation that banks can legally engage in crypto asset activities marks a major milestone in U.S. financial regulation entering the Web3 era. It’s not just a policy statement—it’s a strategic signal pointing to a shift in the boundaries of banking, a push toward crypto compliance, and a nudge to elevate industry standards. For traditional banks, it’s a ticket to a new ocean of digital asset services. For the crypto market, it’s a milestone moment of being embraced by the mainstream financial system.
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