Key Points:
- The Office of the Comptroller of the Currency (OCC) issued Interpretive Letter 1184 on May 7, 2025, confirming that national banks and federal savings associations may buy, sell and custody customer-directed Bitcoin (BTC), Ethereum (ETH) and other crypto assets.
- Banks may outsource crypto custody and trade execution to third-party service providers—such as Coinbase Custody, BitGo or Charles Schwab—subject to standard third‑party risk management requirements.
- In late April, the Federal Reserve Board withdrew its 2022 and 2023 supervisory letters that had required banks to notify the Fed before engaging in crypto‑related activities.
- The regulatory rollbacks form part of a broader Trump‑era push to integrate cryptocurrency services into the traditional banking system, alongside parallel actions by the FDIC.
- Market analysts expect that bank‑provided custody and trading services will accelerate institutional and retail inflows into spot Bitcoin and Ethereum ETFs, and potentially into physical‑settled retail trading on bank platforms.
Background: OCC’s Crypto Custody Clarification
On May 7, 2025, the OCC released Interpretive Letter 1184, explicitly confirming that National Banks and Federal Savings Associations:
- May buy and sell crypto assets held in custody at the direction of their customers.
- May provide custody (wallet) services as an internal bank function.
- May outsource custody and execution functions to qualified third‐party crypto service providers, provided banks apply robust vendor‐risk management frameworks.
This letter builds on earlier OCC interpretive letters (IL 1170 and IL 1183) and represents the most detailed guidance to date on banks’ crypto authority. Notably, the OCC stresses that traditional bank risk controls—capital, liquidity coverage, vendor due diligence, operational resilience—apply equally to crypto activities.
Sub‐Section: What the Letter Says
- Custody at Customer Direction: Banks can hold private keys and manage wallet infrastructure.
- Execution Services: Banks can match buy/sell orders and settle trades, whether internally or via third parties.
- Third‑Party Outsourcing: Banks may contract established custodians (e.g., Coinbase Custody, Fidelity Digital Assets) and trading desks (e.g., Charles Schwab), subject to vendor‐risk management.
Fed’s Withdrawal of Notification Requirements
On April 24, 2025, the Federal Reserve Board withdrew two supervisory letters:
- 2022 Letter: Required banks to notify the Fed prior to launching crypto‑asset products.
- 2023 Letter: Extended notification to stablecoin‑related activities.
The Fed’s rollback removes the obligation for banks to seek prior approval before offering crypto or stablecoin services, signaling a shift toward regulatory permissiveness and innovation support.
Sub‐Section: Joint Regulator Action
The coordinated actions by the OCC, Fed and FDIC reflect a unified front. In conjunction with the Fed’s withdrawal:
- The FDIC has indicated interest in similar deregulatory moves, though no formal guidance has been published.
- Together, these changes repeal a 2023 joint statement cautioning banks about crypto volatility and legal uncertainty.
Trump Administration’s Crypto‑Friendly Agenda
President Donald Trump’s administration has articulated pro‑crypto policies across multiple agencies:
- Executive Order on Crypto Reserves: Encouraged banks and treasurers to consider Bitcoin reserve holdings.
- SEC Litigation Moratorium: Directed the Securities and Exchange Commission (SEC) to pause growth‑impeding lawsuits against exchanges and token issuers lacking clear regulatory frameworks.
- Legislative Support: Backed bills to clarify crypto’s legal status and banking integration.
Analysts view the OCC and Fed actions as direct extensions of these policies, aiming to embed digital assets into “traditional” finance while maintaining systemic safeguards.
Implications for Banks and Customers
Customer Impact
- Simplified Access: Retail and institutional clients can transact BTC and ETH within existing bank apps, streamlining onboarding and KYC.
- Unified Account Management: Crypto balances appear alongside deposit, loan and investment accounts.
- Trust & Insurance: Bank‑based custody may carry FDIC insurance for fiat holdings and additional insurance or indemnity for crypto components.
Bank Impact
- New Revenue Streams: Fee income from custody, trading spreads and advisory services.
- Competitive Pressures: Traditional banks must compete with native crypto players (Coinbase, Binance) and fintech firms (SoFi, Morgan Stanley).
- Risk Management: Banks will need to enhance operational controls, cybersecurity measures and compliance programs to handle 24/7 trading and decentralized technical ecosystems.
Recent Market Trends
- Spot Crypto ETF Growth: BlackRock’s and Fidelity’s spot Bitcoin ETFs saw record inflows in April 2025, with net new capital exceeding $2 billion weekly.
- Institutional Adoption: Morgan Stanley is reportedly developing in‑house crypto trading for its E*Trade platform in 2026.
- Coinbase & Circle Banking Charters: Major crypto firms are applying for full banking charters to blend banking and crypto services under one roof.
- SoFi Re‑Entry: SoFi announced it will re‑resume crypto investing services in mid‑2025 following its acquisition of a bank charter.
Potential Risks and Mitigations
| Risk | Mitigation |
|---|---|
| Volatility & Liquidity | Capital buffers, liquidity coverage ratios, standardized stress tests. |
| Cybersecurity Threats | Enhanced multi‑factor authentication, hardware security modules, regular penetration testing. |
| Regulatory Compliance | Continuous monitoring of evolving SEC, FinCEN, state money‑transmitter requirements. |
| Third‑Party Vendor Failures | Rigorous due diligence, SLA‑backed contracts, contingency recovery plans. |
Conclusion
The OCC’s Interpretive Letter 1184 and the Fed’s withdrawal of notification requirements mark a watershed moment in U.S. banking regulation—bridging the gap between crypto‑native platforms and mainstream financial institutions. By authorizing banks to offer custody, trading and outsourcing of Bitcoin, Ethereum and other digital assets, U.S. regulators have opened the door to seamless integration of cryptocurrencies within traditional banking services. This regulatory rapprochement promises to lower entry barriers for consumers, broaden institutional adoption, and usher in new revenue models for banks—provided that robust risk and compliance frameworks are rigorously applied. As spot ETFs flourish and bank charters for crypto firms proliferate, the financial landscape is poised for a paradigm shift: the convergence of decentralized digital assets and centralized banking under a unified regulatory umbrella.
