U.S. banking regulators provide a blueprint for cryptocurrency custody for lending institutions

The Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued a joint statement guiding banks on how to provide cryptocurrency custody services to customers while avoiding regulatory violations. U.S. banking regulators released a blue paper on the holdings of digital cryptocurrencies by lending institutions.

This is the latest move by regulatory agencies from the Trump era as they weigh how traditional lending institutions should engage in digital asset businesses. The statement noted that banks considering providing custody services for crypto assets should take into account the rapidly changing characteristics of the crypto market, including the technology behind crypto assets, and they must implement a risk management framework that can appropriately adapt to the associated risks. Previously, regulators withdrew guidance on the risks of the crypto industry in April, allowing lending institutions to more freely offer products and services to clients engaged in digital asset trading. At that time, the Federal Reserve also rescinded a 2022 directive requiring banks to provide advance notice of crypto asset activities. The agency stated that, instead, their crypto activities would be monitored through normal regulatory procedures