U.S. regulator mandates banks to apply for permission before dealing with crypto activities

U.S. banks are required to acquire written permission from their bank supervisors before engaging in certain activities that involve cryptocurrency, a key regulator stated on Tuesday.

The Office of the Comptroller of the Currency said banks must show that they possess appropriate risk management tools before getting involved in activities like providing custody services for clients’ crypto holdings.

In a statement, acting Comptroller Michael Hsu said that “Because many of these technologies and products present novel risks, banks must be able to demonstrate that they have appropriate risk management systems and controls in place to conduct them safely.”

The regulator’s new position raised the bar for banks considering certain crypto activities.

The new interpretive letter prohibits banks from engaging in several crypto-related activities, such as providing custody for crypto assets, without giving their bank supervisors prior notice of their intent to partake in such activities.

Supervisors will then assess the bank’s risk management tools and systems before deciding whether or not to allow the bank to proceed with the activity.