U.S. regulator greenlights banks for crypto activities, reversing 2021 restrictions

U.S. regulator greenlights banks for crypto activities, reversing 2021 restrictions

Willow Tohi

• On March 7, the U.S. Office of the Comptroller of the Currency (OCC) announced that banks can now engage in cryptocurrency-related activities, reversing its 2021 policy that imposed stricter oversight. This marks a significant step toward mainstream adoption of digital assets in traditional banking.
• The OCC’s new guidance allows banks to hold cryptocurrency assets, manage stablecoin reserves and participate in distributed ledger networks without prior regulatory approval. Banks must maintain robust risk management controls similar to those used for traditional banking activities.

• The decision rescinds the 2021 policy that required banks to notify regulators and obtain approval before engaging in crypto activities. This shift reflects growing acceptance of cryptocurrencies as a legitimate financial asset class, despite past concerns about volatility and risks.

• The OCC’s move bridges traditional finance and the crypto ecosystem, enabling banks to streamline payments, reduce costs and enhance transparency. It also supports the integration of stablecoins, which are increasingly used for transactions and remittances.

• While the decision fosters innovation, challenges remain, including cryptocurrency volatility, fraud and inconsistent regulatory oversight across agencies. The move aligns with global trends toward crypto acceptance but highlights the need for a cohesive regulatory framework to balance innovation and risk management.

In a landmark move that signals a shift in the regulatory landscape for cryptocurrencies, the U.S. Office of the Comptroller of the Currency (OCC) announced on March 7 that banks are now permitted to engage in certain cryptocurrency-related activities. This decision reverses a 2021 policy that imposed stricter oversight on banks venturing into the crypto space, marking a significant step toward mainstream adoption of digital assets in the traditional banking system.

The OCC’s latest guidance allows banks to hold cryptocurrency assets, manage reserves for stablecoins and participate in distributed ledger networks without requiring prior approval from regulators. Acting Comptroller of the Currency Rodney E. Hood emphasized that banks must maintain robust risk management controls, akin to those used for traditional banking activities.

“The OCC expects banks to have the same strong risk management controls in place to support novel bank activities as they do for traditional ones,” Hood stated. “Today’s action will reduce the burden on banks to engage in crypto-related activities and ensure that these bank activities are treated consistently by the OCC, regardless of the underlying technology.”

The OCC’s decision to rescind its 2021 policy is a pivotal moment for the banking sector. That year, the regulator had mandated that banks notify their supervisory offices and obtain approval before engaging in crypto-related activities. Supervisors were required to evaluate a bank’s systems to ensure they could safely conduct such activities.

This cautious approach reflected broader regulatory concerns about the volatility and risks associated with cryptocurrencies. In 2023, the OCC, alongside the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC), issued a joint statement warning banks about the risks posed by crypto-asset market vulnerabilities, including liquidity concerns.

However, the OCC’s latest move signals a departure from this stance, aligning with the growing acceptance of cryptocurrencies as a legitimate financial asset class.

MORE....