US banks can ultimately custody the code, regulators confirm

The OCC, FDIC and the Federal Reserve issued a joint statement today, explicitly granting banks permission to the ciphers of their clients’ custody. Several regulators have tried to enact this policy independently, but today the rules are even more clear.

However, there are some caveats to this, as regulators repeatedly tried to emphasize consumer protection. Most importantly, banks are explicitly prohibited from having clients hold keys to these custody mechanisms.

Crypto enters a new era in US banking

The new crypto attitude to clean has permeated federal regulatory devices and has brought about a wide range of changes.

However, prolonged chaos can still delay prominent victory, and agents sometimes lose their fight. Today, three federal financial regulators worked together to release a statement to confirm that banks can detain codes.

These three institutions, the OCC, FDIC and the Federal Reserve, each have made several moves in recent months to clarify their relationship with banks’ crypto.

For example, the OCC tried to explicitly review these custody rules in May. Previously, FDIC published documents related to decommissioning of the code and changed the rules to prevent future abuse.

Even the Federal Reserve, which recently clashed with Trump, is working to bridge the gap between banks and crypto. We have removed reputational risk guidelines that will strongly discourage Tradfi institutions far from the industry.

In short, many of the biggest regulators all want to change this rule. The SEC, which did not sign today’s statement, also approved a similar language in January. But today these three institutions came together to make their position even more clear.

“Bank organizations may provide the storage of crypto assets with a trustee or non-supporting ability. Bank organizations have the authority to manage the same way that bank organizations manage other assets held as trustees,” the agency’s statement reads.

So, what does this actually mean? Simply put, these regulators do everything to reassure banks that they are free to engage in custody of their crypto.

This statement provides several general guidelines to ensure maximum consumer protection, including conducting audits, maintaining regulatory compliance, and deploying appropriate cybersecurity.

However, these agencies were stiffened at one point that could irritate some community members. When a bank manages crypto, it is the main custodian.

When these institutions hold assets, they are responsible for all. In other words, banks cannot under any circumstances allow clients to directly access their account’s private key.

Still, this is a small workaround. Many crypto enthusiasts have specifically decided to stay independent rather than assets, but these people may not give the banks a token in the first place. Most customers simply reclaim their assets as soon as the bank handles the transfer request.

In other words, these regulators have not fully adopted a laissez-faire approach. Their statement repeatedly highlighted the need for banks to maintain compliance and security, and even imposed new rules.

The federal government is willing to experiment with bank in-laws ciphers, but it maintains strict standards.