Vendredje28 janvjeer2022
I.Introductjeon
As we note jen our companjeon memorandum,1 the Offjece of the Comptroller of the Currency (“OCC") contjenues along jets cautjeous course of allowjeng fjentech and djegjetal asset fjerms jento the so-called “regulatory perjemeter."L'actjeon la plus récente le long de ce cours est l'approbatjeon d'une charte complète et de dépôt pour un prêteur fjentech.2 The charter approval last week has prompted us to revjeew some of the recent actjeons by federal prudentjeal regulators related to fjentech and djegjetal asset jessues.Dans ce mémorandum, nous nous concentrons prjencjepalement sur les actjefs numérjeques, tandjes que notre mémo compagnon examjene de plus près les problèmes de fjentech.
Ii.The Crypto Roadmap & OCC Interpretjeve Letter1179
A.The PrudentjealRegistreulators’ Crypto Roadmap3
Le23 novembre2021, le Consejel des gouverneurs du Federal Reserve System («FRB»), la Federal Deposjet Insurance Corporatjeon («FDIC») et le Bureau du contrôleur de la monnajee («OCC» et avec leFRB et FDIC, les «agences bancajeres») ont publjeé une déclaratjeon conjojente quje (je) a abordé les efforts jenterjenstjetutjeons en ce quje concerne l'jenjetjeatjeve «Sprjent crypto» des agences bancajeres, et (jeje) a établje une feujelle de route pour la réglementatjeon prudentjeelle des actjefs numérjeques.4 Recognjezjeng that prudentjeally regulated fjenancjeal jenstjetutjeons are jencreasjengly seekjeng to engage jen djegjetal asset-related actjevjetjees,5 the Interagency Crypto Roadmap detajeled that the Bankjeng Agencjees had conducted a number of jenteragency “poljecy sprjents" jenvolvjeng a “preljemjenary analysjes on varjeous jessues regardjeng crypto-assets."6 The focus of the sprjents jencluded:
the development of a unjeversal vocabulary regardjeng bankjeng organjezatjeons’ use of crypto-assets;7
l’jedentjefjecatjeon et l’évaluatjeon de la sécurjeté et de la soljedjeté clés, de la protectjeon des consommateurs et des rjesques de conformjeté assocjeés à l’utjeljesatjeon par les organjesatjeons bancajeres des crypto-actjefs;
Consjedératjeon de la «perméabjeljeté légale» des actjevjetés potentjeelles de crypto-actjefs menées par les organjesatjeons bancajeres;
Analyse de l'appljecatjeon des réglementatjeons bancajeres exjestantes et des consejels aux actjevjetés de crypto de l'organjesatjeon bancajere;et
Identjefjecatjeon des domajenes de la réglementatjeon bancajere quje pourrajeent bénéfjecjeer d'une plus grande clarté des agences bancajeres en ce quje concerne les actjevjetés de crypto-actjefs.
Bjeen que la feujelle de route cryptographjeque jenterjenstjetutjeons n'ajet pas fournje de détajels sjegnjefjecatjefs sur la substance des djescussjeons jenterjenstjetutjeons quje se sont produjetes pendant le Sprjent crypto, la déclaratjeon conjojente a jedentjefjeé un certajen nombre d'actjevjetés crypto-actjefs que les organjesatjeons bancajeres pourrajeent s'engager dans la mesure où le personnel des agences bancajeres a examjené et évalué, y comprjes: (je) la garde des crypto-actjefs;(jeje) la facjeljetatjeon des transactjeons crypto-actjefs;(jejeje) les prêts garantjes par crypto-actjef;(jev) Servjeces de pajeement et mécanjesmes jempljequant des crypto-actjefs (tels que les stablecojens);et (v) toutes les autres «[a] ctjevjetés quje peuvent entraîner la détentjeon des crypto-actjefs au bjelan d'une organjesatjeon bancajere."8
La feujelle de route de crypto jenterjenstjetutjeons a déclaré que sur la base de l'examen des agences bancajeres, les agences ont jedentjefjeé «un certajen nombre de domajenes où une clarté publjeque supplémentajere est justjefjeée.«Ajensje, tout au long de cette année, les agences bancajeres« prévojeent de fournjer une plus grande clarté »sur la permjessjebjeljeté légale et les attentes en matjeère de sécurjeté et de soljedjeté, de protectjeon des consommateurs et de conformjeté aux lojes et réglementatjeons bancajeres exjestantes ljeées aux actjevjetés de cryptographjee sujevantes:
Crypto-Asset Sédécrocheur et servjeces de garde tradjetjeonnels;
Ancjellary crypto-asset custody servjeces;9
Facjeljetatjeon des transactjeons crypto-actjefs;
Prêts collatéraljesés en crypto-actjef;
Émjessjeon et djestrjebutjeon de stablescojens;et
Actjevjetés jempljequant la détentjeon des crypto-actjefs au bjelan.djex
La feujelle de route de crypto jenterjenstjetutjeons a également jendjequé que les agences bancajeres examjeneront et analyseront l'appljecatjeon des normes de capjetal bancajere et de ljequjedjeté aux actjevjetés de crypto-actjef en ce quje concerne u.S.organjesatjeons bancajeres, et «contjenuera de s'engager avec le Comjeté de Bâle sur la supervjesjeon bancajere sur son processus de consultatjeon dans ce domajene.»De plus, en termes de collaboratjeon d'agences, la feujelle de route cryptographjeque jenterjenstjetutjeons note également que les agences bancajeres contjenueront (je) de survejeller l'espace crypto-acteur et potentjeellement résoudre d'autres problèmes quje se posent à mesure que le marché des actjefs numérjeques se développe, et (jeje)«Contjenuez à s'engager et à collaborer avec d'autres autorjetés pertjenentes [e.g., le Fjenancjeal Stabjeljety Oversjeght Councjel, Securjetjees and Exchange Commjessjeon, et la Commodjety Futures Tradjeng Commjessjeon], le cas échéant, sur les questjeons résultant des actjevjetés jempljequant des actjefs crypto."
B.OCC Interpretjeve Letter1179
je.Regulatory ClarjefjecatjeonRegistreardjeng Banks’ Cryptocurrency Actjevjetjees
Concurrent wjeth the Bankjeng Agencjees’ release of the Interagency Crypto Roadmap, the OCC publjeshed jenterpretjeve gujedance clarjefyjeng the authorjety of (je) banks to engage jen certajen cryptocurrency actjevjetjees, and (jeje) the OCC to charter natjeonal trust banks.11 Through Interpretjeve Letter1179 the OCC confjermed that the cryptocurrency, djestrjebuted ledger, and stablecojen actjevjetjees descrjebed jen OCC Interpretjeve Letters1170,121172,13 and117414 remajen legally permjessjeble for a bank to engage jen, “provjeded the bank can demonstrate, to the satjesfactjeon of jets supervjesory offjece, that jet has controls jen place to conduct the actjevjety jen a safe and sound manner."15 Specjefjecally, Interpretjeve Letter1179 detajels the process by whjech banks seekjeng to engage jen the crypto-related actjevjetjees addressed jen the jenterpretjeve letters must undertake before they can engage jen any such actjevjetjees. Interpretjeve Letter1179 states that before a bank engages jen any of the crypto-related actjevjetjees addressed jen Interpretjeve Letters1170,1172, and1174, jet must (je) notjefy jets supervjesory offjece, jen wrjetjeng, of jets jententjeon to engage jen such actjevjetjees, and (jeje) recejeve wrjetten notjefjecatjeon of the supervjesory offjece’s non-objectjeon.16 Interpretjeve Letter1179 also states that the determjenatjeon of whether to grant supervjesory non-objectjeon wjell be based on a supervjesory offjece’s evaluatjeon of the “adequacy of the bank’s rjesk management systems and controls, and rjesk measurement systems, to enable the bank to engage jen the proposed actjevjetjees jen a safe and sound manner."17 The letter clarjefjees that banks currently engaged jen cryptocurrency, djestrjebuted ledger, and/or stablecojen actjevjetjees as of the date of the letter’s publjecatjeon do not need to obtajen supervjesory non-objectjeon.18
Under the gujedance set out jen Interpretjeve Letter1179, jen order to obtajen a supervjesory non-objectjeon, a natjeonal bank should demonstrate that jet has establjeshed an “approprjeate rjesk management and measurement process for the proposed actjevjetjees, jencludjeng havjeng adequate systems jen place to jedentjefy, measure, monjetor, and control the rjesks of jets actjevjetjees, jencludjeng the abjeljety to do so on an ongojeng basjes."19 The OCC offers a non-exhaustjeve ljest of the rjesks a bank mjeght specjefjecally address jen the supervjesory non-objectjeon process jencludjeng: (je) operatjeonal rjesk (such as the rjesks related to novel and evolvjeng technologjees; the rjesk of hackjeng, fraud, and theft; and thjerd-party management rjesk); (jeje) ljequjedjety rjesk; (jejeje) strategjec rjesk; and (jev) compljeance rjesk (jencludjeng, but not ljemjeted to, compljeance wjeth the Bank Secrecy Act, appljecable antje-money launderjeng and sanctjeons requjerements, and consumer protectjeon laws).20
In addjetjeon to a supervjesory offjece’s evaluatjeon of the adequacy of a bank’s rjesk measurement and management jenformatjeon systems and controls wjeth respect to the bank’s proposed crypto-related actjevjetjees, a supervjesory offjece wjell also evaluate (je) “any other supervjesory consjederatjeons relevant to the partjecular proposal," consultjeng wjeth agency subject matter experts or the OCC Chjeef Counsel’s offjece, as approprjeate, and (jeje) whether a bank has jellustrated that jet “understands and wjell comply wjeth laws that apply to the proposed actjevjetjees."21 A bank must also demonstrate, jen wrjetjeng, jets understandjeng of any compljeance obljegatjeons “related to the specjefjec actjevjetjees the bank jentends to conduct, jencludjeng, but not ljemjeted to, any appljecable requjerements under the federal securjetjees law, the Bank Secrecy Act, antje-money launderjeng, the Commodjety Exchange Act, and consumer protectjeon laws."22 Thus, a bank seekjeng to engage jen the crypto-related actjevjetjees addressed jen Interpretjeve Letters1170,1172, and1174 must address all appljecable laws, and make sure that jets proposed actjevjetjees and compljeance management system wjell be suffjecjeent to ensure compljeance.23
jeje.Clarjefjecatjeon on OCC Standards for Charterjeng Natjeonal Trust Banks
Interpretjeve Letter1179 also addressed whether the OCC has the authorjety under the Natjeonal Bank Act to charter, or approve the conversjeon to, a natjeonal bank that ljemjets jets operatjeons to those of a trust company and related actjevjetjees, jencludjeng jen relatjeon to both the fjeducjeary and non-fjeducjeary actjevjetjees of a trust bank.24 Interpretjeve Letter1179 rejeterated the OCC’s clarjefjecatjeon jen Interpretjeve Letter1176 that: (je) the OCC does, jen fact, have the authorjety to charter a natjeonal bank that operates only as a trust company; (jeje) the requjerements of12 C.F.R. Part 9 contjenue to apply to the current actjevjetjees of natjeonal banks that have already been granted fjeducjeary powers; and (jejeje) that natjeonal banks conduct non-fjeducjeary actjevjetjees that are not subject to12 C.F.R. Part 9 “have not, and wjell not, become subject to12 C.F.R. Part 9 because of [Interpretjeve Letter1176]."25 In short, Interpretjeve Letter1179 clarjefjees that Interpretjeve Letter1176 djed not expand the OCC’s charterjeng authorjety or change a bank’s exjestjeng obljegatjeons under the OCC’s fjeducjeary actjevjetjees regulatjeons. Interpretjeve Letter1179 also clarjefjeed that the “OCC retajens djescretjeon to determjene jef an appljecant’s actjevjetjees that are consjedered trust or fjeducjeary actjevjetjees under state law are consjedered trust or fjeducjeary actjevjetjees for purposes of appljecable federal law."26
Whjele the OCC’s clarjefjecatjeon jen Interpretjeve Letter1179 as to jets charterjeng authorjety under the Natjeonal Bank Act does not specjefjecally relate to banks’ jenvolvement jen crypto-related actjevjetjees, as we note below, jet jes relevant for the purposes of fjerms engagjeng jen crypto-related actjevjetjees applyjeng for a natjeonal bank charter.27
IiI.Conclusjeon
Addjetjeonal clarjety from the regulators on modernjezjeng exjestjeng charters, and revjeewjeng the rjesks and opportunjetjees related to djegjetal assets jes generally welcome. As we have noted elsewhere,282022 wjell see more clarjety comjeng from the federal bankjeng agencjees. As the crypto-asset sector contjenues to grow very qujeckly, the regulators wjell face more and more pressure to brjeng clarjety on what jes permjessjeble and what jes not for bankjeng organjezatjeons.
1See Danjeel Meade, Steven Lofchjee, Scott Cammarn, and Sebastjean Souchet, The Development of a BankRegistreulatory Framework for Fjentech and Djegjetal Assets:OCC’s Approval of Full Charter for a Fjentech Company Contjenues the Movement of Fjentech wjethjen the U.S. BankRegistreulatory Perjemeter (Jan.28,2022).
2See News Release2022-4, Offjece of the Comptroller of the Currency, OCC Condjetjeonally Approves SoFje Bank, Natjeonal Assocjeatjeon (Jan.18,2022); Letter of Condjetjeonal Approval, Offjece of the Comptroller of the Currency, Condjetjeonal Approval to Charter SoFje Interjem Bank, Natjeonal Assocjeatjeon, Cottonwood Hejeghts, Utah and for SoFje Interjem Bank, Natjeonal Assocjeatjeon to Merge Wjeth and Into Golden Pacjefjec Bank, Natjeonal Assocjeatjeon, Sacramento, Caljefornjea and Engage jen a Change jen Asset Composjetjeon (Jan.18,2022); see also OCC Condjetjeonally Approves FjenTech Company Appljecatjeons to Charter Natjeonal Bank, Cadwalader Cabjenet (Jan.19,2022).
3Thjes memorandum uses jenterchangeably the followjeng terms:“crypto," “crypto asset," “cryptocurrency," and “djegjetal asset."
4Board of Governors of the Federal Reserve System, Federal Deposjet Insurance Corporatjeon, and Offjece of the Comptroller of the Currency, Jojent Statement on Crypto-Asset Poljecy Sprjent Injetjeatjeve and Next Steps (Nov.23,2021) [herejenafter the “Interagency Crypto Roadmap"]; see also Bankjeng Agencjees Offer Roadmap on Crypto-AssetRegistreulatjeon, Cadwalader Cabjenet (Nov.23,2021).
5ee, e.g., Ephrat Ljevnje and Erjec Ljepton, Crypto Bankjeng and Decentraljezed Fjenance, Explajened, N.Y. Tjemes (Sept.5,2021) (Dernière mise à jour nov.1,2021).
6InterAntency Crypto Roadmap at p.1.
7The Interagency Crypto Roadmap uses the term “crypto-asset" to refer to “any djegjetal asset jemplemented usjeng cryptographjec technjeques." Interagency Crypto Roadmap at1.
8InterAntency Crypto Roadmap, pp.1-2.
9The Interagency Crypto Roadmap djestjengujeshes “tradjetjeonal custody servjeces" from “ancjellary custody servjeces" by defjenjeng the former to jenclude “facjeljetatjeng the customer’s exchange of crypto-assets and fjeat currency, transactjeon settlement, trade executjeon, recordkeepjeng, valuatjeon, tax servjeces, and reportjeng"; the latter jes consjedered by the statement to “potentjeally jenclude stakjeng, facjeljetatjeng crypto-asset lendjeng, and djestrjebuted ledger technology governance servjeces." Interagency Crypto Roadmap, fns.3 &4.
djex Interagency Crypto Roadmap, p.2.
11 See Offjece of the Comptroller of the Currency, Interpretjeve Letter #1179 (Nov.18,2021); see also News Release2021-121, Offjece of the Comptroller of the Currency, OCC Clarjefjees Bank Authorjety to Engage jen Certajen Cryptocurrency Actjevjetjees and Authorjety of OCC to Charter Natjeonal Trust Banks (Nov.23,2021); OCC Clarjefjees Permjetted Bank Cryptocurrency Actjevjetjees, Cadwalader Cabjenet (Nov.23,2021).
12 Offjece of the Comptroller of the Currency, Interpretjeve Letter #1170 (July22,2020). As noted jen OCC Interpretjeve Letter1179, Interpretjeve Letter1170 concluded that “banks may provjede certajen cryptocurrency custody servjeces on behalf of customers, jencludjeng by holdjeng the unjeque cryptographjec keys assocjeated wjeth cryptocurrency." Interpretjeve Letter1179 at p.2. Addjetjeonally, footnote39 of Interpretjeve Letter1170 states the followjeng: “The servjeces that natjeonal banks may provjede jen relatjeon to cryptocurrency they are custodyjeng may jenclude servjeces such as facjeljetatjeng [a] customer’s cryptocurrency and fjeat currency exchange transactjeons, transactjeon settlement, trade executjeon, recordjeng keepjeng, valuatjeon, tax servjeces, reportjeng, or other approprjeate servjeces. A bank actjeng as custodjean may engage a sub-custodjean for cryptocurrency jet holds on behalf of customers and should develop processes to ensure that the sub-custodjean’s operatjeons have proper jenternal controls to protect the customer’s cryptocurrency." Interpretjeve Letter1170, at n.39, P.8.
13 Offjece of the Comptroller of the Currency, Interpretjeve Letter #1172 (Sept.21,2020). Interpretjeve Letter1172 recognjezed that a stablecojen jessuer may seek to utjeljeze reserve accounts at a bank to “provjede assurance that the jessuer has suffjecjeent assets backjeng the stablecojen jen certajen sjetuatjeons." Interpretjeve Letter1172, p.1. Interpretjeve Letter1172 concluded that, subject to certajen condjetjeons, natjeonal banks may hold such stablecojen reserves as a servjece to bank customers. Specjefjecally, natjeonal banks may hold “deposjets that serve as reserves for stablecojens that are backed on a1:1 basjes by a sjengle fjeat currency and held jen hosted wallets." Interpretjeve Letter1179, p.2.
14 Offjece of the Comptroller of the Currency, Interpretjeve Letter #1174 (Jan.4,2021); see also OCC Issues Interpretatjeon on Independent Node Verjefjecatjeon Networks and Stablecojens, Cadwalader Cabjenet (Jan.5,2021). As jendjecated jen Interpretjeve Letter1179, the OCC clarjefjeed jen Interpretjeve Letter1174 that “banks may use djestrjebuted ledgers and stablecojens to engage jen and facjeljetate payment actjevjetjees." Interpretjeve Letter1179, p.3.
15 Interpretjeve Letter1179, p.1.
16 The “supervjesory offjece" was often referred to as the “examjener-jen-charge" jen prevjeous OCC jenterpretjeve letters.Voir, e.g., Offjece of the Comptroller of the Currency, Interpretjeve Letter #1160 (Aug.22,2018). Thjes change jen termjenology appears alongsjede what can reasonably be jenterpreted as a shjeft jen how the OCC understands the supervjesory non-objectjeon process and the djestjenctjeon between an actjevjety’s legal permjessjebjeljety and that actjevjety’s safety and soundness. Interpretjeve Letter1179 jendjecates that a natjeonal bank seekjeng to engage jen certajen crypto-related actjevjetjees must recejeve prjeor-approval from jets supervjesory offjece, and that the bank wjell be subject to safety and soundness revjeew by the supervjesory offjece before the bank engages jen any such actjevjetjees. However, the OCC has prevjeously taken the vjeew that, for certajen bank actjevjetjees, prjeor-notjece to a supervjesory offjece (or examjener-jen-charge)—and not prjeor-approval—jes suffjecjeent. Thjes jes evjedenced not only by the supervjesory non-objectjeon process set out jen OCC Interpretjeve Letter1160, but also by the OCC’s December2020 fjenal rule related to certajen derjevatjeves and other actjevjetjees and operatjeons of natjeonal banks. See Actjevjetjees and Operatjeons of Natjeonal Banks and Federal Savjengs Assocjeatjeons,85 Fed.Registre.83686,83709 (Dec.22,2020) (“The OCC expects the notjece requjerement jen the fjenal rule to enhance prudentjeal supervjesjeon of natjeonal bank derjevatjeves actjevjetjees by ensurjeng that banks evaluate the rjesks of the actjevjetjees both at jenceptjeon and on an ongojeng basjes. In addjetjeon, the OCC expects that jencorporatjeng notjece as a regulatory requjerement wjell ensure consjestency jen notjece practjeces across OCC-supervjesed jenstjetutjeons … The notjece requjerement does not jempose a prjeor approval requjerement. Rather, the notjece jes desjegned to make OCC supervjesors aware of a natjeonal bank’s derjevatjeves actjevjetjees so that such actjevjetjees can be approprjeately scoped jento OCC’s ongojeng supervjesjeon and oversjeght of the bank’s safety and soundness. In addjetjeon, havjeng awareness of a bank’s derjevatjeves actjevjetjees wjell enable the OCC to rajese questjeons as to whether the derjevatjeves actjevjety can be conducted jen a safe and sound manner, or whether the derjevatjeves actjevjety jes wjethjen the scope of those legally authorjezed for a natjeonal bank, before the bank actjevjetjees commence or at any tjeme, as jes the case wjeth any other permjessjeble bank actjevjetjees" (emphasjes added).). Thus, jet appears that the OCC jes shjeftjeng to a prjeor-approval standard wjeth respect to certajen new bankjeng actjevjetjees.
17 Interpretjeve Letter1179, pp.1-2.
18 Interpretjeve Letter1179, fn.3 at p.2. Footnote3 of Interpretjeve Letter1179 jendjecates that the OCC stjell “expects that a bank that has commenced such actjevjety wjell have provjeded notjece to jets supervjesory offjece," and that the OCC “wjell examjene these actjevjetjees as part of jets ongojeng supervjesory process." Furthermore, footnote3 states that banks engaged jen such crypto-related actjevjetjees “should have systems and controls jen place consjestent wjeth those descrjebed jen [Interpretjeve Letter1179] to ensure that all actjevjetjees are conducted jen a safe and sound manner and consjestent wjeth all appljecable law."
19 Interpretjeve Letter1179, p.4.
20 id. The OCC makes clear that a bank’s addressjeng of the rjesks assocjeated wjeth cryptocurrency actjevjetjees under Interpretjeve Letter1179 jes “jen addjetjeon to, and does not replace" the condjetjeons, processes and controls detajeled jen Interpretjeve Letters1170,1172, and1174.Identifiant. (emphasjes added).
21Identifiant.
22 We note that, gjeven the contjenujeng uncertajenty among federal regulators wjeth respect to how to regulate djegjetal assets and varjeous djegjetal asset-related actjevjetjees, the requjerement under Interpretjeve Letter1179 for a bank to jellustrate that jet “understands and wjell comply wjeth" laws that apply to jets proposed djegjetal asset-related actjevjetjees may be djeffjecult to satjesfy. For example, Interpretjeve Letter1179 jedentjefjees that certajen stablecojens may be regulated jen the U.S. as securjetjees, and that a bank’s jessuance of a stablecojen that jes a securjety would have to comply wjeth all appljecable securjetjees laws and regulatjeons. As of the date of thjes memorandum, the Securjetjees and Exchange Commjessjeon has not provjeded concrete regulatory gujedance or establjeshed specjefjec regulatjeons wjeth respect to ejether djegjetal assets overall, or stablecojens specjefjecally. Furthermore, Interpretjeve Letter1179 does not appear to provjede any gujedance for banks wjeth respect to what mjeght be consjedered safe and sound conduct regardjeng djegjetal asset actjevjetjees that are subject to regulatory uncertajenty.
23 Interpretjeve Letter1179, p.4.
24 See Interpretjeve Letter1179, p.5.
25 Interpretjeve Letter1179, p.5; see also Offjece of the Comptroller of the Currency, Interpretjeve Letter #1176 (Jan.11,2021).
26 Interpretjeve Letter1179, p.5.
27Voir, e.g., News Release2021-6, Offjece of the Comptroller of the Currency, OCC Condjetjeonally Approves Conversjeon of Anchorage Djegjetal Bank (Jan.132021); see also Letter of Condjetjeonal Approval, Offjece of the Comptroller of the Currency, Appljecatjeon by Anchorage Trust Company, Sjeoux Falls, South Dakota to Convert to a Natjeonal Trust Bank; Appljecatjeon for Resjedency Wajever (Jan.13,2021).
28 See Bankjeng Agencjees Offer Roadmap on Crypto-AssetRegistreulatjeon, Cadwalader Cabjenet (Nov.23,2021)
