The Office of the Comptroller of the Currency (OCC) has provided updated guidance that clearly states national banks can conduct certain activities involving the treatment of crypto-asset network fees. This statement confirms the scope of what banks can do with blockchain technology, specifically the treatment of operational expenditures for federally chartered institutions.
The OCC’s ruling, as set out in Interpretive Letter 1186, formally allows national banks to pay transactional costs on distributed ledger networks, better known as “gas fees,” provided that the fees are incurred for activities already permissible for the bank under existing regulations.
The letter also confirms that banks are permitted to hold certain amounts of crypto-assets on their balance sheet as principal. The amount held must be limited to what is reasonably foreseeable and necessary to cover these anticipated network fees.
Ensuring Safe and Compliant Engagement with Digital Assets
Banks may hold crypto-assets as principal to test new platforms or systems related to permissible crypto-asset activities, whether the platforms are developed in-house or acquired from a third-party vendor. The OCC emphasizes that all activities must be conducted safely and soundly and in compliance with applicable law.
This new interpretive letter is part of a series of efforts by the OCC to address the rapidly changing landscape of digital assets within the federally chartered banking system. Past statements have provided a baseline for banks to engage with blockchain and stablecoins.
Before this clarification, it was less clear whether banks had authority to hold the underlying digital assets required to pay transaction fees—often essential for operational functionality on many networks—on their balance sheets for such operational purposes directly. The confirmation provides regulatory clarity for national banks interested in using public or permissioned blockchains to deliver or facilitate banking services.
The OCC’s approach, as illustrated in this letter, focuses on allowing regulated financial institutions to research and explore digital asset technologies within a prudent and risk-aware framework. By precisely tying the authority to hold the asset to a direct, reasonably foreseeable operational need to pay network fees or conduct necessary testing of a platform, it ensures that the activity remains consistent with a safe and sound manner of operation.
This is a supportive strategy that allows for responsible innovation, in that it requires banks to comply with all applicable law and to implement internal controls for these activities, thereby reducing unnecessary risk.
Streamlining Operational Steps for Blockchain Integration
The ruling will likely streamline the operational steps for national banks to incorporate blockchain and crypto-asset services into their offerings. In confirming that national banks can hold small, operationally necessary amounts of crypto-assets, the OCC eliminates a potential regulatory hurdle to greater use of DLT.
The move may be a sign that the regulator is willing to provide further clarity on other aspects of banks’ involvement with digital assets, such as the use of tokenized assets or other uses of DLT. Banks considering the use of DLT to provide payment, settlement, or other services now have clearer, more explicitly permitted means of managing the incidental expense associated with those activities.
The Interpretive Letter 1186 from the OCC represents a positive development in the regulatory treatment of digital assets. It recognizes the functional necessities of operating on blockchains and gives national banks explicit permission to manage the network fees related to such activity and to hold any necessary testing assets. It is confirmation of supporting innovation within the traditional financial system in concert with its mandate for safety and soundness.
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