OCC interpretive letters on bank crypto custody: the current state of permissibility
A national bank can custody crypto-assets, hold stablecoin reserves, and run an independent node — within the bounds set by Letters 1170, 1172, 1174, and the 2021 supervisory non-objection requirement. Here is what is currently permitted and what still requires prior notice.
The OCC has used the interpretive letter mechanism to map out what activities national banks may conduct in the crypto sector. Four letters define the current perimeter.
The four letters
- Interpretive Letter 1170 (July 2020) — banks may provide custody services for crypto-assets, including holding the unique cryptographic keys.
- Interpretive Letter 1172 (September 2020) — banks may hold reserves backing stablecoins on behalf of customers (a "permissible payment activity").
- Interpretive Letter 1174 (January 2021) — banks may use independent node verification networks (i.e., participate in blockchains) and stablecoins as a payment infrastructure for clients.
- Interpretive Letter 1179 (November 2021) — clarifies that the three activities above are permissible only after the bank notifies its supervisory office in writing and receives a supervisory non-objection, demonstrating that the bank has appropriate controls.
What "controls" means in practice
Letter 1179 didn't reverse the substantive permission — it conditioned it on demonstrating:
- Risk identification and measurement: legal, credit, operational, liquidity, strategic, and compliance risks specific to crypto.
- Operational controls: secure key management, third-party risk for custody-sub-custodian arrangements, business continuity.
- AML/BSA: integration with the bank's existing FinCEN program.
- Consumer protection: clear disclosure of which assets are bank deposits vs. crypto holdings.
The supervisory office may impose conditions or require examination before approving.
What is not covered by these letters
- Holding crypto-assets on the bank's own balance sheet for trading or investment (outside custody-for-customer) — generally not permissible without separate authorisation.
- Issuing the bank's own stablecoin — would require separate analysis under the National Bank Act and potentially separate notice.
- Direct integration of DeFi protocols by the bank — the IVN letter (1174) covers infrastructure use, not principal participation in lending or AMM pools.
Capital treatment
Separately from permissibility, capital treatment is governed by the Basel Committee's December 2022 crypto-asset prudential standard, which the US prudential regulators (OCC, FRB, FDIC) implement domestically. Group 2 crypto-assets (most public-chain tokens including BTC and ETH) carry a 1,250% risk weight, effectively requiring dollar-for-dollar capital backing. Group 1b (tokenised traditional assets meeting the eligibility criteria) get the same treatment as the underlying asset.
The combined effect: a national bank can technically custody crypto and operate on a blockchain after supervisory non-objection, but direct balance-sheet exposure remains punitively expensive under Basel — keeping bank participation concentrated on the agency/custody side rather than principal trading.
Recent direction
The 2025 federal banking-agency joint statement reaffirmed that crypto-asset activities by banks should follow "well-established processes for engaging in new activities" — i.e., notify, demonstrate controls, receive supervisory non-objection. The pendulum on direction has swung between administrations; the mechanism (interpretive-letter permissibility + supervisory non-objection + Basel capital treatment) has been stable.
Primary Sources
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