US Banks Greenlit for ’Riskless’ Crypto Transactions After OCC Clarification
The gatekeepers just handed out the keys.
The Office of the Comptroller of the Currency (OCC) has issued a pivotal letter, effectively clearing national banks and federal savings associations to engage in certain cryptocurrency activities. This isn't about wild speculation—it's about providing infrastructure. The guidance carves out a path for banks to act as nodes in the digital asset ecosystem, facilitating transactions they deem 'riskless' by holding the underlying asset for a fleeting moment.
The Nod for Node Operators
Forget mining or trading on their own books. The OCC's blessing is far more surgical. It authorizes banks to use new technologies, including independent node verification networks (think blockchain validators), to conduct payment activities. The core function? Verifying transactions, bundling them, and executing settlements—all in near real-time. It's a back-office revolution dressed in regulatory approval, turning stodgy vaults into potential crypto gateways.
Riskless by Design, Profitable by Nature
The magic word is 'riskless principal.' In this model, a bank can facilitate a crypto transaction between two parties by briefly taking custody of the asset—sometimes for mere seconds—before passing it to the buyer. The bank never holds a risky, open position. It simply collects a fee for the service, creating a new revenue stream with, theoretically, minimal balance sheet exposure. It's the financial equivalent of a toll booth on a digital highway.
The Fine Print and the Future Fight
This isn't a free-for-all. Banks must still navigate a maze of anti-money laundering (AML), know-your-customer (KYC), and cybersecurity rules. The OCC expects robust risk management frameworks before a single satoshi moves. Critics are already circling, questioning if any crypto activity can ever be truly 'riskless' and warning of regulatory arbitrage. One cynical observer might note that banks have finally found a fee-generating activity riskier than overdraft charges but with better optics.
The letter is a seismic shift in posture. It moves crypto from the fringe to a permissible line of business, forcing every major bank to at least run the numbers. The race to build the plumbing for the next financial system just got official starters. Whether this leads to mainstream adoption or just another fee-heavy silo, however, remains the trillion-dollar question.
OCC’s New Framework
According to the OCC’s guidance, acting as a riskless principal for crypto-assets aligns with the services that national banks already offer to custody customers.
National banks are now allowed to buy and sell both financial and non-financial assets held in custody based on customer directions, adhering to existing agreements and legal requirements.
Therefore, facilitating the buying and selling of digital assets for custody customers in a riskless principal capacity is essentially the same as acting as an agent for those customers, and it is acknowledged as a legitimate banking activity.
This new framework means that customers can transact in crypto-assets through established national banks, providing a more regulated environment compared to exchanges that operate outside the purview of strict financial oversight.
Key Concern For Banks In Crypto Transactions
The OCC also distinguished between riskless principal transactions in digital assets and those in traditional securities. The primary differences lie in the underlying assets and the technology used to facilitate these transactions.
The main concern associated with riskless principal transactions is counterparty credit risk, especially settlement risk. Similarly, in customer-driven, perfectly matched derivative transactions that utilize transitory title transfer, credit risk is the predominant factor. In the letter, the OCC concluded the following:
As with any activity, a bank that conducts riskless principal crypto-asset transactions must do so in a SAFE and sound manner and in compliance with applicable law. The OCC will examine riskless principal crypto-asset activities as part of its ongoing supervisory process.
Featured image from DALL-E, chart from TradingView.com
