U.S. National Banks Get OCC Green Light for Riskless Principal in Crypto Assets

U.S. national banks get OCC green light for riskless principal in crypto assets, giving clients access to digital assets within a regulated perimeter under Interpretive Letter 1188.

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Interpretive Letter 1188: What Exactly the OCC Permits

In Interpretive Letter 1188, the Office of the Comptroller of the Currency explicitly confirms that national banks may conduct riskless principal transactions in crypto assets on behalf of clients. This refers to a model in which the bank buys an asset from one counterparty and almost simultaneously resells it to another, acting as an intermediary rather than a proprietary trader with its own balance sheet at risk. The OCC stresses that such activities fall within the business of banking under 12 U.S.C. §24(Seventh), including when the underlying asset isn't a security but a crypto asset and settlement occurs through a distributed ledger.

The OCC describes the structure as one in which the intermediary purchases an asset from the first counterparty only when there is a mirrored order from the second counterparty, and the offsetting trades are executed nearly simultaneously, without holding the asset in inventory and with limited market risk aside from good-faith settlement default. For this reason, the regulator views this role as the economic equivalent of a broker rather than dealing on a proprietary basis.

"In a riskless principal transaction, an intermediary purchases an asset from one counterparty for immediate resale to a second counterparty, the ultimate purchaser of the asset."

The OCC separately emphasizes that the prohibition on dealing in securities in §24(Seventh) doesn't apply to non-security crypto assets, which means that the key question isn't the nature of the asset as such but the character of the banking service. If the bank acts as a financial intermediary and doesn't assume the client’s risk, this activity can be treated either as a recognized banking function or as a natural extension of it.

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Risk, Technology, and the Link to Already Permitted Crypto Activities

At the analytical level, the OCC relies on the test that is functional equivalence to a recognized banking service, benefits to customers and the bank, a risk profile comparable to already permitted activities, and no conflict with the practices of state chartered banks. The regulator argues that riskless principal transactions in crypto assets are functionally equivalent to brokerage services and logically follow from crypto activities that banks are already permitted to conduct, primarily custody, client agency transactions, and operations involving stablecoins.

"As part of their traditional role as financial intermediaries, banks have broad powers to buy and sell financial investment instruments as agent for customers."

From a risk perspective, the OCC notes that the key exposures are counterparty credit risk and settlement risk rather than market risk from holding the asset. This brings riskless principal transactions in crypto assets close to structures that are already familiar to banks, ranging from riskless principal trades in securities to perfectly matched derivatives with transitory title transfer. The regulator also points out that operational risk associated with the use of a distributed ledger is similar in nature to the risks that banks already assume when conducting other permitted crypto activities.

At the same time, the OCC maintains a technologically neutral position: what matters isn't the platform but what the bank is doing and how it manages risk. The regulator draws a direct analogy between book entry settlement in traditional securities and updating records on a public or private distributed ledger. The logic is straightforward: if a bank is already allowed to safekeep crypto assets, execute client transactions, and pay network fees, then using a riskless principal model for the same assets doesn't push it beyond the business of banking, but instead broadens the channels through which clients can access these assets.

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Conclusion

Interpretive Letter 1188 effectively builds a bridge between the crypto market and traditional banking. The OCC doesn't create a separate regime for crypto assets, but instead embeds riskless principal transactions in such assets into the existing business of the banking framework. For national banks, this means the ability to move client crypto transactions out of the realm of unregulated venues and into a supervised perimeter, using familiar brokerage and risk management practices. For the market as a whole, it is another step toward the gradual shift of trading and access to core crypto assets from an isolated crypto segment into infrastructure governed by banking standards on capital, compliance, and supervision. Get more insights from our guides for beginners and professionals, and stay tuned for the latest updates and opportunities in the new economy, crypto industry, and blockchain developments!