The US Government has always had something of an adversarial relationship with Bitcoin, and cryptocurrencies in general, due to its anonymity and its usurpation of fiat currency. That’s usually meant that topics like taxation, banking, and other regulatory aspects were often ambiguous, prohibitive, or sometimes just completely ignored. However, there have been some steps to become more inclusive, and on July 22 2020, the OCC has released a new letter that serves to eventually broaden the usage and legitimacy of cryptocurrencies in the eyes of regulatory powers.
The OCC, or Office of the Comptroller of the Currency, is a regulatory body that seeks to regulate, establish, and supervise national banks. With today’s letter, the OCC has clarified that national banks now have the authority to provide not just fiat bank accounts, but cryptocurrency custodial services to cryptocurrency businesses. This means that banks and other financial institutions now have the ability to offer cryptocurrency companies traditional banking services as well as provide custodial services such as securing customers’ private keys.
The OCC has also acknowledged that custodial services for cryptocurrencies would be radically different from the traditional custodial services offered for fiat currencies. Since cryptocurrencies, unlike fiat currencies, do not have a physical form, custodial services would involve protection of a customer’s private key.
The Acting Comptroller Brian P. Brooks, in the letter, reiterated that the mission of banks is to help protect the assets of their customers, which nowadays, can include cryptocurrencies. This letter, he stated, was meant to ensure that banks would be able to best fulfill this mission.
The letter did stop there, however. While cryptocurrency businesses have struggled with financing from traditional financial institutions due to the perceived risks of blockchain technologies, this letter has reaffirmed that traditional financial institutions do have the right to provide cryptocurrency companies similar financial tools as other lawful businesses, as long as risks are effectively managed and “complies with applicable laws.”
Historically, this has been problematic for cryptocurrency companies because, due to the nature of cryptocurrency, it is generally intertwined with fiat currencies. This has meant that cryptocurrency companies have had a strong demand for banking services in order to allow customers to exchange their cryptocurrencies for fiat currencies, but have had limited supply as these companies are considered to have a high risk profile. This is by no means a fringe idea in the banking world. Now, JP Morgan holds significant investments in cryptocurrencies, but as recently as 2017, CEO Jamie Dimon referred to Bitcoin as a “scam.’ In a bold move, the OCC has helped to legitimise not just the idea of cryptocurrencies, but the multitude of businesses that heavily depend on the technology.