A federal banking agency, the Office of the Comptroller of the Currency (OCC), has smoothed the way for national banks and federal savings associations to engage in crypto-related activities with the issuance of Interpretive Letter 1183 on March 7, 2025. This development is in step with a broader turning point in federal bank supervision: the federal banking agencies are now seeking to engage with the industry to integrate crypto safely and incrementally into the banking system.
The OCC’s Interpretive Letter rescinds previous guidance that had mandated a supervisory non-objection process for banks under the OCC’s purview seeking to engage in certain crypto-related activities. Now, these banks are no longer required to obtain any non-objection or other supervisory feedback from the OCC to engage in the following crypto-related activities:
- providing crypto-asset custody services,
- holding dollar deposits serving as reserves backing stablecoins, and
- using distributed ledger technology (DLT) and stablecoins to facilitate payments.
The OCC also withdrew from two previously issued interagency statements with the Federal Reserve Board of Governors (Federal Reserve) and the Federal Deposit Insurance Corporation (FDIC) that highlighted the risks to banking organizations relating to crypto assets.
This new openness to crypto innovation in banking is consistent with a broader shift in bank supervision. FDIC acting chairman Travis Hill recently announced that the FDIC is “actively reevaluating our supervisory approach to crypto-related activities,” specifically flagging the agency’s previous guidance that FDIC-supervised banks should provide prior notification to the FDIC if they intend to engage in any crypto-related activities. In a recent speech on bank regulation, Federal Reserve governor and President Trump’s nominee for the Federal Reserve’s vice chair for supervision Michelle Bowman emphasized promoting innovation through “transparency and open communication, including demonstrating a willingness to engage during the development process.” Expect further crypto-friendly developments with the issuance of President Trump’s executive order directing federal agencies to identify and consider modifying or rescinding any prior crypto-related regulations, guidance, or orders.
Innovative banks and technology service providers to banks have a critical role to play in the crypto ecosystem. Innovators can take advantage of this important pivot in bank supervision, including with the following practical considerations:
- Address the threshold question of whether a given crypto-related activity is legally permissible. Banks are limited in the activities they can engage in by “legal permissibility”—that is, before a bank can engage in new activities of any kind, including crypto-related activities, it must ensure that the specific activity is permissible under applicable banking law and regulation. For any crypto-related activity, refer to prior supervisory statements on legal permissibility or identify where analogies could be drawn to traditional financial activities where permissibility has already been established (e.g., safekeeping and traditional custodial services)—but innovators will not stop there. Also consider additional services that focus on the unique aspects of the crypto ecosystem (e.g., staking or protocol governance) and be aware of the need to undertake the associated legal permissibility analysis.
- Have a handle on the well-established risk stripes. Prudential oversight in banking means that banks must operate with safety and soundness in mind, as well as have appropriate measures and controls in place to manage risks. Key risk areas in the context of crypto assets include the following: operational and IT risks (particularly with respect to wallet management, the underlying protocol, and any smart contracts), third-party risk (particularly given that many banks rely on service providers for technical expertise and infrastructure), consumer risk (e.g., fraud and scams), market risk (e.g., volatility in crypto markets), and legal/compliance risk (namely around compliance with anti-money laundering requirements and economic sanctions).
- Keep an eye out for new statements or guidance, particularly on key safety and soundness and compliance considerations related to crypto custody activities and potentially other crypto-related activities such as customer trade facilitation services and crypto-collateralized loans.
We are entering a new chapter in the evolution of crypto, DLT, and the businesses around them. Leadership in digital financial technology is a national priority, and technologies like DLT and crypto continue to present unique and promising opportunities for fintech companies and banks to collaboratively upgrade the outdated underpinnings of our financial system. The innovations that are most advanced in addressing legal uncertainties, mitigating risk, and building strong compliance infrastructures will be best positioned for success.
Wilson Sonsini advises fintech companies regarding the integration of these innovative technologies into banking and counsels our clients on how to strategically navigate the novel, evolving legal issues raised by crypto and DLT. Please do not hesitate to contact Jess Cheng or any member of the firm’s fintech and financial services practice for more information.