As we were all expecting, the OCC under Acting Comptroller Rodney Hood is making some bold changes. Reading through his speeches so far this year, Acting Comptroller Hood has 4 key priorities that we think banks should be paying attention to:
We are sharing our thoughts on each of these priorities (you can read about Bank-Fintech Partnerships here), and today we are talking about digital assets.
Acting Comptroller Rodney Hood has said that, “The digitalization of financial services is not a trend—it is a transformation,” (source). In his view, Digital Assets are here to stay and banks would be naive to ignore the opportunity.
Through his speeches, and Interpretive Letter 1183, he is trying to encourage banks to move into this space so long as they have appropriate risk management frameworks:
"In March, the OCC issued Interpretive Letter 1183, removing the requirement that banks seek a prior 'non-objection' to engage in permissible digital asset activities. Instead, we now require that banks demonstrate appropriate risk management frameworks—ensuring consistency, transparency, and strategic alignment," (source).
More than 50 million Americans own cryptocurrency, and the opportunities in such a fast moving industry can seem endless. For banks entering this space, alignment with core competencies is sensible. Here are some opportunities for banks to consider that are less likely to raise eyebrows at Board meetings.
Wealthy crypto holders need institutional-grade custody solutions. Keeping millions in digital assets on phones or hardware wallets is higher risk, and so banks that can provide secure, insured custody services have a massive revenue opportunity.
Crypto holders want to access liquidity without selling their positions. Banks that can provide crypto-collateralized lending will tap into a market that traditional credit scoring can't reach.
Customers want seamless movement between fiat and digital currencies, and to be able to move money cross-border. Banks that can integrate crypto payments, for example by adopting Stablecoins, with traditional banking services will differentiate themselves from both traditional competitors and crypto-only platforms.
Some crypto products and services are far more risky than others. Define your risk appetite up front so you can decide easily between things like custody and advisory services (lower risk) and proprietary trading (higher risk). Remember, you can always change your risk appetite once you’re comfortable and generating sustainable revenue.
The OCC expects "appropriate risk management" for digital asset activities. This means cybersecurity protocols, custody procedures, liquidity management, and compliance testing and oversight. These things need to be specifically designed for digital asset operations, so be sure to bring your compliance team in early so they have time to prepare. Here’s our guide on setting up financial crime KRIs.
Digital asset custody requires secure key management, cold storage solutions, and specialized insurance. Partner with established providers (or build capabilities if you have the resources to both build and maintain these systems), but don't underestimate the technical complexity.
The smartest banks getting into digital assets won't get into crypto trading for a quick profit. They'll provide services—custody, payments, advisory—that generate fee income regardless of crypto market volatility. The goal is sustainable revenue regardless of the latest meme coin.
The OCC gave banks permission to operate, not permission to ignore compliance. Anti-money laundering, know-your-customer, fraud prevention and compliance testing requirements are even more critical in digital asset activities.
Digital assets require specialized knowledge for both operational staff and relationship managers. Invest in educating your team before launching services, not after problems arise. You may also consider hiring specialist leaders to drive the initiative forward, because this can’t be a half-hearted bet.
Hood called digital assets "the architecture of a new financial frontier," (source). Banks that treat this as a niche market for tech enthusiasts will ultimately lose to those that recognize it as mainstream financial infrastructure of the future.
Everything new can seem overwhelming at first, but the market opportunity is massive and the operational requirements are manageable for banks that plan properly. And the best news? Rarely has an industry had so many enthusiasts, so you won’t find it hard to hire experts to lead you to increased, sustainable, revenue generation.
Get in touch with us today to discuss the compliance requirements around launching digital assets.
The OCC’s Priorities under Acting Comptroller Hood: Bank-Fintech Partnerships
Wolf & Company Selects Cable as Foundational Compliance Partner for Automated Control Testing
A Community Bank CCO’s Guide to Making Smart Decisions When the Rules Keep ChangingAs we were all expecting, the OCC under Acting Comptroller Rodney Hood is making some bold changes. Reading through his speeches so far this year, Acting Comptroller Hood has 4 key priorities that we think banks should be paying attention to:
We are sharing our thoughts on each of these priorities (you can read about Bank-Fintech Partnerships here), and today we are talking about digital assets.
Acting Comptroller Rodney Hood has said that, “The digitalization of financial services is not a trend—it is a transformation,” (source). In his view, Digital Assets are here to stay and banks would be naive to ignore the opportunity.
Through his speeches, and Interpretive Letter 1183, he is trying to encourage banks to move into this space so long as they have appropriate risk management frameworks:
"In March, the OCC issued Interpretive Letter 1183, removing the requirement that banks seek a prior 'non-objection' to engage in permissible digital asset activities. Instead, we now require that banks demonstrate appropriate risk management frameworks—ensuring consistency, transparency, and strategic alignment," (source).
More than 50 million Americans own cryptocurrency, and the opportunities in such a fast moving industry can seem endless. For banks entering this space, alignment with core competencies is sensible. Here are some opportunities for banks to consider that are less likely to raise eyebrows at Board meetings.
Wealthy crypto holders need institutional-grade custody solutions. Keeping millions in digital assets on phones or hardware wallets is higher risk, and so banks that can provide secure, insured custody services have a massive revenue opportunity.
Crypto holders want to access liquidity without selling their positions. Banks that can provide crypto-collateralized lending will tap into a market that traditional credit scoring can't reach.
Customers want seamless movement between fiat and digital currencies, and to be able to move money cross-border. Banks that can integrate crypto payments, for example by adopting Stablecoins, with traditional banking services will differentiate themselves from both traditional competitors and crypto-only platforms.
Some crypto products and services are far more risky than others. Define your risk appetite up front so you can decide easily between things like custody and advisory services (lower risk) and proprietary trading (higher risk). Remember, you can always change your risk appetite once you’re comfortable and generating sustainable revenue.
The OCC expects "appropriate risk management" for digital asset activities. This means cybersecurity protocols, custody procedures, liquidity management, and compliance testing and oversight. These things need to be specifically designed for digital asset operations, so be sure to bring your compliance team in early so they have time to prepare. Here’s our guide on setting up financial crime KRIs.
Digital asset custody requires secure key management, cold storage solutions, and specialized insurance. Partner with established providers (or build capabilities if you have the resources to both build and maintain these systems), but don't underestimate the technical complexity.
The smartest banks getting into digital assets won't get into crypto trading for a quick profit. They'll provide services—custody, payments, advisory—that generate fee income regardless of crypto market volatility. The goal is sustainable revenue regardless of the latest meme coin.
The OCC gave banks permission to operate, not permission to ignore compliance. Anti-money laundering, know-your-customer, fraud prevention and compliance testing requirements are even more critical in digital asset activities.
Digital assets require specialized knowledge for both operational staff and relationship managers. Invest in educating your team before launching services, not after problems arise. You may also consider hiring specialist leaders to drive the initiative forward, because this can’t be a half-hearted bet.
Hood called digital assets "the architecture of a new financial frontier," (source). Banks that treat this as a niche market for tech enthusiasts will ultimately lose to those that recognize it as mainstream financial infrastructure of the future.
Everything new can seem overwhelming at first, but the market opportunity is massive and the operational requirements are manageable for banks that plan properly. And the best news? Rarely has an industry had so many enthusiasts, so you won’t find it hard to hire experts to lead you to increased, sustainable, revenue generation.
Get in touch with us today to discuss the compliance requirements around launching digital assets.
