ABA and BPI Letter to OCC on Interpretive Letters re: Banks' Use of Modernized Technologies

The Honorable Michael J. Hsu
Acting Comptroller of the Currency
Office of the Comptroller of the Currency
400 7th St. SW
Washington, DC 20219

Dear Acting Comptroller Hsu:

The Bank Policy Institute and the American Bankers Association are writing regarding the letter dated August 10, 2022, to you from Senators Warren, Durbin, Sanders, and Whitehouse addressing the OCC’s Interpretive Letters authorizing banks to engage in certain traditional banking activities using modernized technologies. These Interpretive Letters, issued pursuant to the OCC's authority to administer and interpret the National Bank Act, concluded that the following activities were within the scope of permissible traditional banking activities for national banks: providing certain cryptocurrency custody services on behalf of customers, including by holding the unique cryptographic keys associated with cryptocurrency; holding deposits that serve as reserves for stablecoins that are backed on a 1:1 basis by a single fiat currency and held in hosted wallets; and using distributed ledgers and buying, selling, and issuing stablecoins to engage in and facilitate payment activities. In each case, the OCC sensibly determined that the activity was simply a modernized version of a traditional banking activity and thereby permissible for banks.

The Congressional letter states that in light of the "recent turmoil in the crypto market," "the OCC's actions on crypto may have exposed the banking system to unnecessary risk" and asks that you withdraw "existing interpretive letters that have permitted banks to engage in certain crypto-related activities." However, the recent events in the crypto market were wholly unrelated to banks' involvement in the traditional banking activities described in the OCC Interpretive Letters. Thus, their rescission would not enhance the protections of bank investors, consumers, or the financial system in connection with cryptocurrency activities. Rather, rescinding those letters would serve only to undermine banks' ability to leverage modernized technologies to bring traditional banking products and services to customers in more reliable, safer and more efficient ways.

Additionally, while we agree that the activities of largely unregulated nonbank crypto firms present meaningful and various risks (including the risk of consumer and investor harm), the conclusion that the OCC's Interpretive Letters must be rescinded to address these risks is inapposite. The withdrawal of those letters is not warranted, nor would such withdrawal achieve the goal of imposing "stronger protections . . . to mitigate crypto's risks to the financial system and consumers."

Download the letter to read the full text.