Federal Regulator Approves Riskless Crypto Trading for US Banks

The Office of the Comptroller of the Currency (OCC) has authorized national banks to engage in riskless principal crypto-asset transactions. This change bridges the gap between traditional banking and digital assets, allowing banks to facilitate crypto trades without holding inventory.

Key Takeaways

The OCC's new policy enables banks to act as intermediaries in crypto transactions.
This regulatory shift eliminates barriers for banks wanting to offer crypto services directly.
Banks must adhere to know-your-customer protocols and transaction monitoring to ensure compliance and customer protection.
The decision strengthens banks’ positions against fintech and crypto firms.
Regulatory developments continue, including stablecoin frameworks and guidance on tokenized deposits.

Federal Regulator Approves Riskless Crypto Trading for US Banks

Banking’s Crypto Gateway Opens Under New Framework

In Interpretive Letter 1188, senior deputy comptroller Adam Cohen announced that national banks can now conduct riskless principal transactions with crypto-assets. This approach is similar to existing practices in the brokerage space, where banks act as financial intermediaries by temporarily owning an asset to facilitate trades.

Banks typically engage in riskless principal transactions in various asset classes, including securities and derivatives. The OCC has extended this interpretation to crypto-assets, indicating that banks can mitigate market risks through offsetting trades while maintaining limited exposure to potential defaults from counterparts.

Cohen noted that the OCC’s authority covers all types of crypto-assets, even those not classified under federal securities law, because these transactions align with the traditional intermediary roles of banks. The regulator also addressed concerns about operational complexity, arguing that banks already navigate similar risks when processing securities transactions using electronic ledgers. He emphasized that distributed ledger technology (DLT) is merely a modern method of recording transactions, comparable to long-standing book-entry systems.

Crypto Trading for US Banks - Centralized vs Decentralized Ledger

Why This Change Matters for Bank Crypto Operations

This new policy removes the limitations that previously constrained banks from directly engaging in crypto trading or necessitated reliance on third-party intermediaries for executing client transactions. By enabling banks to perform riskless principal activities, the OCC empowers them to offer direct crypto services while ensuring regulatory compliance and customer protections.

Consequently, banks can now cater to clients seeking exposure to cryptocurrencies without needing to collaborate with unregulated exchanges or anonymous counterparts. The new framework mandates banks to implement know-your-customer (KYC) protocols, monitor transactions, and possess the capacity to freeze or reverse transfers when necessary. These security measures are already integrated into specific blockchain platforms, like Stellar.

This policy change also enhances banks’ competitiveness against fintech companies and crypto-native firms that are pursuing federal bank charters. Several prominent institutions are already moving towards crypto integration; for example, Bank of America has authorized its advisers to recommend Bitcoin exchange-traded funds (ETFs), and JPMorgan has started allowing customers to fund Coinbase accounts using Chase cards.

Regulatory Momentum Builds Across Digital Assets

The OCC’s decision is part of a broader trend as federal agencies fast-track the creation of frameworks for stablecoins and tokenized deposits under the GENIUS Act. The Federal Deposit Insurance Corporation (FDIC) plans to release its initial stablecoin rule proposal soon, which will define capital, liquidity, and reserve requirements for banks issuing dollar-backed tokens.

According to Federal Reserve Vice Chair Michelle Bowman, the central bank is collaborating with other agencies to establish standards for linking digital assets with traditional financial systems. The Treasury Department recently concluded its second public consultation regarding non-bank stablecoin issuers, advancing separate oversight mechanisms for the entire US stablecoin market.

Acting FDIC chair Travis Hill announced that forthcoming guidance on tokenized deposits will clarify how blockchain representations of bank deposits will be regulated under existing laws. This initiative addresses the growing industry interest in employing distributed ledgers for payment processing and settlement.

Jonathan Gould, who became the OCC's first permanent comptroller since 2020 following his confirmation in July, has defended the agency against criticisms regarding the approval of charters for crypto firms. At the recent Blockchain Association Policy Summit, he stated that the custody and safekeeping of digital assets have been carried out electronically for many years, questioning the rationale behind treating crypto differently.

This year, the OCC received approximately 14 bank charter applications, including requests from Coinbase, Circle, and Ripple, all seeking federal supervision for their stablecoin and custody services. Gould minimized concerns about the agency's capacity for supervision, highlighting that it already oversees a crypto-native national trust bank and manages daily inquiries from traditional banks launching new financial products.