OCC Chief: Banks Blocking Crypto Custody Is 'Recipe for Irrelevance'

Banks trying to block crypto custody from the federal system are pushing a “recipe for irrelevance,” the nation's top banking regulator warned Monday, as he defended over $2 trillion in existing digital custodial activity that industry opponents claim violates federal law.

Jonathan Gould, Comptroller of the Currency, told the Blockchain Association's policy summit in Washington that efforts to prevent national trust banks from engaging in crypto custody ignore decades of precedent and risk stagnating the entire banking system.

"It is important that we do not confine banks, including current national trust banks, to the technologies or businesses of the past," Gould remarked. "That's a recipe for irrelevance."

Banks push back against crypto charters

The pushback comes as the Independent Community Bankers of America and Bank Policy Institute have urged the OCC to deny crypto charter applications, claiming they exploit regulatory loopholes.

The ICBA filed opposition letters against both Coinbase's application and Sony Bank's Connectia Trust bid last month, warning the applications represent "an impermissible reinterpretation" of federal law.

Gould refuted claims that approving crypto custody services would break with OCC precedent, noting that national trust banks have engaged in nonfiduciary custody activities since the 1970s.

In the third quarter of this year alone, national trust banks reported nearly $2 trillion in nonfiduciary custodial assets under administration, representing 25% of their total assets, he said.

"Prohibiting national trust banks from engaging in nonfiduciary activities would not only threaten to undermine the dynamic and evolving nature of the federal banking system but would also disrupt well over a trillion dollars in traditional activities of existing national trust banks," Gould noted.

State trust companies in New York and South Dakota already provide digital asset custody services to customers, Gould added, saying that banks have held electronic rights to company shares in custody for decades.

"There is simply no justification for considering digital assets differently," he said.

The OCC received 14 de novo charter applications this year, nearly matching the total from the previous four years combined, with several applications involving digital asset activities or national trust bank conversions, reversing a 15-year slump in which applications averaged fewer than four annually, down from more than 100 a year in the late 1990s.

He called the regulatory blockade "myopic" and said it "was not legally justifiable and contributed to a less dynamic and competitive banking industry."

At the ABA convention in October, the OCC chief countered the banking groups’ concerns, saying that any stablecoin-driven deposit flight “would not happen in unnoticed fashion” and that stablecoins could help community banks compete with larger institutions.

Gould said the OCC has supervised trust banks “for decades,” including a “crypto-native national trust bank”—a reference to Anchorage Digital, whose consent order over AML deficiencies was lifted in August after the OCC concluded continued supervision wasn’t needed for its “safety and soundness.”

Crypto.com, Circle, Ripple, Bridge (Stripe's stablecoin arm), and Paxos are the other crypto firms that have filed for national trust charters. Erebor Bank received conditional OCC approval last month.

"The federal banking system's capacity to evolve from the telegraph to the blockchain... is one of its greatest strengths," Gould said, pledging the OCC would "resist any efforts to erode its utility and diversity."