OCC — National Bank Digital Asset Activities and the SAB 121 Reversal

Regulator — The Office of the Comptroller of the Currency is the prudential regulator for national banks and federal savings associations — institutions that collectively hold trillions in assets and provide financial services to hundreds of millions of Americans. The OCC’s decisions about what activities national banks may conduct define the boundaries of regulated banking in the United States. When the OCC issued a series of interpretive letters between 2020 and 2021 explicitly authorizing national banks to custody cryptocurrency, hold stablecoin reserves, and use blockchain for payment activities, it opened the door to institutional digital asset participation at the bank charter level — a development with more structural significance for tokenized finance than any blockchain technology innovation.

Overview

The Office of the Comptroller of the Currency operates under the Treasury Department and is headed by the Comptroller of the Currency, a presidential appointee. The OCC charters and supervises approximately 1,200 national banks and federal savings associations under the National Bank Act and the Home Owners’ Loan Act, as well as the federal branches of foreign banks operating in the United States. National banks — those with “National” or “N.A.” in their name — hold OCC charters and operate under unified federal supervision rather than the state-by-state regulatory framework that governs state-chartered banks.

The OCC’s digital asset regulatory activity is concentrated in three landmark interpretive letters issued in 2020-2021, each expanding the scope of permissible digital asset activities for national banks under existing banking authority.

Interpretive Letter 1170 (July 2020) addressed the most fundamental question: can a national bank provide cryptocurrency custody services? The OCC’s answer was yes, under certain conditions. Banks can custody cryptocurrency as a modern form of safekeeping activity — functionally equivalent to the custody of physical currency or traditional securities — subject to appropriate risk management, compliance controls, and capital adequacy. The letter specified that banks may hold the unique cryptographic keys associated with cryptocurrency on behalf of customers. This authorized national banks to serve as Qualified Custodians for digital assets — a foundational legal development for institutional allocation.

Interpretive Letter 1172 (September 2020) authorized national banks to hold stablecoin reserves — specifically, to hold the reserve assets (bank deposits, Treasury securities) that back stablecoins. This authorized banks to serve as the reserve holders for USD-pegged stablecoins, integrating stablecoin infrastructure into the regulated banking system. Circle’s USDC reserve holdings (including bank deposits at regulated US banks) operate within this framework.

Interpretive Letter 1174 (January 2021) authorized national banks to use permissioned blockchain networks for payment activities and to hold or issue stablecoins as part of their permissible payment activities. This was the broadest expansion: banks can participate in blockchain-based payment networks (like JPMorgan Kinexys or Citi Token Services’ private networks) and issue bank stablecoins (tokenized deposits) as legitimate banking activities.

The Anchorage Digital charter — granted in January 2021, the same month as IL 1174 — was the most direct action of the OCC’s digital asset permissive era. Anchorage Digital applied for a national bank charter through the OCC’s novel or special-purpose charter process, demonstrating capital adequacy, management capability, AML/BSA compliance systems, and a viable business plan. The OCC’s approval created the only federally chartered crypto bank in the United States. Acting Comptroller Brian Brooks — who had previously worked at Coinbase as Chief Legal Officer — led the OCC during this period of interpretive expansion.

The leadership change in 2021 (Brooks to Hsu) and the broader Biden administration’s more cautious approach to crypto created a more measured OCC posture, with reduced new guidance and increased emphasis on safety and soundness principles for banks already engaged in digital asset activities. The OCC coordinated with the SEC on the SAB 121 reversal in 2025, recognizing that SAB 121’s balance sheet accounting requirement made bank digital asset custody economically unviable and contradicted the policy intent of IL 1170.

Trust bank charters — OCC or state — are the other primary regulatory vehicle for digital asset custody. BitGo (South Dakota), Paxos (New York DFS), Gemini Trust Company (New York DFS), and Coinbase Trust Company (New York DFS) all operate under trust company charters rather than full banking licenses, providing a lighter-touch regulatory path for pure custody operations that do not involve deposit-taking or lending.

Key Metrics

Tokenization Activity

The OCC’s interpretive letters created the legal foundation for the bank-based tokenization infrastructure layer that has emerged since 2020. JPMorgan Kinexys (JPM Coin, digital payments) and Citi Token Services both operate within the authority established by IL 1174’s stablecoin and blockchain payment permissions. National banks participating in Broadridge DLR’s blockchain repo settlement do so within the custody and payment authorities established by IL 1170 and IL 1174.

The SAB 121 reversal — where the OCC’s engagement was critical — removed the single most significant practical barrier to bank digital asset custody after IL 1170 had established the legal authority. SAB 121’s balance sheet requirement would have required BNY Mellon, JPMorgan, and other major banks to hold capital against the full value of client crypto positions — costs that would have made bank custody offerings uneconomical relative to standalone custodians like BitGo and Anchorage Digital. The reversal enables the competitive bank custody market that IL 1170 anticipated.

The novel charter process remains open as a pathway for crypto-native institutions seeking federal bank status. While Anchorage Digital is the only holder of a federally chartered crypto bank charter as of early 2026, other institutions have explored the pathway. Custodia Bank (Wyoming SPDI) sought a Federal Reserve master account alongside OCC charter consideration, with complex regulatory interactions that illustrate the multi-regulator landscape for crypto banking.

Investment Relevance

The OCC’s digital asset framework is a foundational determinant of whether major US banks can and will participate in the tokenization market at institutional scale. Each interpretive letter that expands permissible bank activity removes a regulatory barrier that had previously excluded the largest capital pools in the world from the tokenized asset market. The SAB 121 reversal, coordinated with the OCC, is the most recent and significant example.

For investors in large US bank equities, the OCC’s regulatory posture directly affects the growth potential of digital asset custody, payments, and tokenization revenue streams that banks are building. More permissive OCC guidance accelerates the bank entry into digital asset services; more restrictive guidance constrains it.

Related Entities

• Anchorage Digital — Only OCC-chartered crypto bank; charter granted January 2021
• JPMorgan Kinexys — National bank using IL 1174 stablecoin/blockchain payment authority
• Citi Token Services — National bank using IL 1174 tokenized deposit authority
• BNY Mellon Digital — National bank using IL 1170 crypto custody authority
• SEC — Coordinate regulator; SAB 121 reversal required joint action