What crypto trades did OCC allow?

TLDR

The OCC allowed U.S. national banks to intermediate riskless principal crypto trades, meaning they can buy from one party and simultaneously sell to another without holding inventory, per an OCC notice.

1. Banks can execute fully offsetting crypto trades with no market inventory risk, similar to brokerage intermediation.
2. The OCC framed these activities as within the business of banking, subject to safety and soundness oversight.
3. Compliance requirements apply, including AML/BSA controls and robust risk management, per the OCC notice.

Deep Dive

1. Riskless Principal Defined

Riskless principal means the bank enters matched buy and sell orders at near the same time and price, avoiding inventory and market exposure. The OCC clarified this model is permissible for crypto as an analog to established brokerage practices in traditional markets in the notice above.

2. Scope and Conditions

The OCC said these transactions fit within the business of banking, enabling national banks to intermediate crypto trades when conducted safely and soundly, as outlined in the OCC notice. The guidance focuses on the structure (fully offsetting trades) rather than naming specific assets, emphasizing that technology-neutral principles apply.

3. Compliance and Risk Management

Banks must implement strong controls for operational, compliance, and settlement risks and adhere to AML/BSA obligations, according to the OCC notice. The primary exposure is counterparty and settlement risk during execution rather than market risk from holding inventory.

Conclusion

OCCs clarification lets national banks act as regulated intermediaries for crypto via riskless principal trades. This could widen access through familiar banking channels while keeping banks exposure limited to brief settlement risk and subject to existing compliance and supervisory standards.