Interpretive Letter 1188: riskless-principal crypto transactions
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Research, not advice. Part of the Bitcoin research archive (October 2026). Claims labelled unverified, contested or fringe are reported, not endorsed; statuses of bills and rules are as of the date checked. Government, court and patent records are public domain; the research notes are CC BY 4.0.
Interpretive Letter #1188
December 2025
December 9, 2025
Stephen A. Lybarger,
Senior Deputy Comptroller for Chartering, Organization and Structure
Office of the Comptroller of the Currency
400 7th St. SW
Washington, DC 20219
Subject: National Bank Engagement in Riskless Principal Transactions in Crypto-Assets
Dear Mr. Lybarger,
This responds to your request for confirmation that national banks may engage in riskless
principal crypto-asset transactions (described below) with and on behalf of their customers. In
connection with recent applications, several applicants have stated their intention to engage in
riskless principal crypto-asset transactions. 1 Applicants have asserted that the activity is part of,
or incidental to, the business of banking. As discussed below, conducting riskless principal
crypto-asset transactions is part of the business of banking and is permissible for a national bank.
I. Background: Riskless Principal Transactions
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 intermediary’s purchase of the asset from the initial counterparty is conditioned on an
offsetting order from the second counterparty to purchase the same asset from the intermediary.
Execution of the offsetting purchase and sale occurs effectively simultaneously. The
intermediary does not hold any asset in inventory in connection with a riskless principal
1
This letter responds to the facts presented by recent applicants. There may be other instances
where a national bank may hold crypto-assets as principal outside the context of the riskless
principal transactions discussed in this letter. For example, a national bank may foreclose on
crypto-asset collateral consistent with 12 U.S.C. § 24(Seventh). Similarly, a national bank may
physically hedge customer-driven derivative transactions with a crypto-assets if it does so in
compliance with the requirements of 12 C.F.R. § 7.1030. National banks may also pay network
fees on blockchain networks to facilitate otherwise permissible activities and hold, as principal,
amounts of crypto-assets on balance sheet necessary to pay network fees for which the bank
anticipates a reasonably foreseeable need. See OCC, Interpretive Letter No. 1186 (Nov. 17,
2025) (“IL 1186”).
transaction except in rare circumstances, such as a bona fide settlement default (i.e., a situation in
which the completion or settlement of one of the transactions does not occur as expected), in
which case the asset is typically sold as soon as possible.
The intermediary in a riskless principal transaction conducts itself as the legal and
economic equivalent of a broker acting as agent. 2 Importantly, the intermediary assumes only
nominal settlement, market, and credit risk, such as in the case of bona fide settlement default.
The transaction is often thought of as “riskless” because the intermediary does not enter into the
transaction without also having entered into an immediate offsetting transaction.
II. Analysis
A. Riskless Principal Transactions in Crypto-Asset Securities
Riskless principal securities transactions are permissible under 12 U.S.C. § 24(Seventh),
which states:
The business of dealing in securities and stock by the association shall be limited
to purchasing and selling such securities and stock without recourse, solely upon
the order, and for the account of, customers, and in no case for its own account,
and the association shall not underwrite any issue of securities or stock . . . .
Because a national bank engaging in riskless principal transactions is not assuming “any
customer’s risk of loss or any liability as guarantor or endorser of the value of securities to its
customers,” it is acting “without recourse.” 3 As a riskless principal transaction in a security
that has some novel features (e.g., it is also a crypto-asset) is nonetheless a riskless principal
transaction in a security under § 24(Seventh), riskless principal transactions with crypto-assets
that are securities are clearly permissible under this same line of reasoning. Thus, the
remainder of this letter will address riskless principal transactions in crypto-assets that are not
securities. 4
B. Riskless Principal Transactions in Crypto-Assets that Are Not Securities
Twelve U.S.C. § 24(Seventh) provides that national banks have the power “[t]o exercise .
. . all such incidental powers as shall be necessary to carry on the business of banking . . . .” The
2
See OCC, Interpretive Letter No. 626, Fed. Banking L. Rep. P 83,508, 1993 WL 639318, *6
(July 7, 1993) (“IL 626”); OCC, Interpretive Letter No. 371, Fed. Banking L. Rep. P 85, 541,
1986 WL 235911, *6 (June 13, 1986) (“IL 371”).
3
IL 371 at *5.
4
The prohibition against dealing in securities in 12 U.S.C. § 24(Seventh) discussed above does
not extend to transactions in non-security crypto-assets.
2
term “business of banking” is not defined in the statute, but the Supreme Court has confirmed
that it is not limited to the enumerated activities in § 24(Seventh). 5
Twelve C.F.R. § 7.1000(c)(1) states the factors that the OCC considers when determining
whether an activity is part of the business of banking:
(i) Whether the activity is the functional equivalent to, or a logical outgrowth
of, a recognized banking activity;
(ii) Whether the activity strengthens the bank by benefiting its customers or its
business;
(iii) Whether the activity involves risks similar in nature to those already
assumed by banks; and
(iv) Whether the activity is authorized for State-chartered banks.
The weight accorded to each factor depends on the facts and circumstances of each case, 6 and the
determination is technology-neutral. 7 As discussed below, the first three factors weigh strongly
in favor of determining that riskless principal crypto-asset transactions are part of the business of
banking.
1. Whether the Activity is the Functional Equivalent to, or a Logical
Outgrowth of, a Recognized Banking Activity
As explained below, riskless principal crypto-asset transactions are both the functional
equivalent to recognized bank brokerage activities and are a logical outgrowth of crypto-asset
custody activities.
5
See NationsBank of North Carolina, N.A. v. Variable Annuity Life Ins. Co., 513 U.S. 251, 258,
n.2 (Jan. 18, 1995) (“We expressly hold that the ‘business of banking’ is not limited to the
enumerated powers in § 24 Seventh and that the Comptroller therefore has discretion to authorize
activities beyond those specifically enumerated.”).
6
12 C.F.R. § 7.1000(c)(2).
7
See, e.g., Independent Ins. Agents of America, Inc. v. Hawke, 211 F.3d 638, 640 (D.C. Cir.
2000) (“Whether a particular banking device’s nomenclature harkens to traditional banking
activities is not dispositive. Instead, the powers of national banks must be construed so as to
permit the use of new ways of conducting the very old business of banking.” (citations and
quotation marks omitted)). See also 12 C.F.R. § 7.5002(a) (“A national bank may perform,
provide, or deliver through electronic means and facilities any activity, function, product, or
service that it is otherwise authorized to perform, provide, or deliver . . . .”).
3
The business of banking includes brokerage of financial investment instruments. 8 This
view reflects national banks’ traditional role as financial intermediaries, rather than being solely
limited to enumerated securities brokerage activities. Specifically, “[a]s part of their traditional
role as financial intermediaries, banks have broad powers to buy and sell financial investment
instruments as agent for customers.” 9 This is a power national banks have long exercised in a
broad array of activities. 10 For example, national banks broker a wide variety of financial
instruments and asset classes, including futures, options, and other derivatives. 11 Courts have
also acknowledged national banks’ ability to, as agent, acquire a wide range of other assets for
customers, including to “obtain[] railroad, steamship or airline tickets for . . . customers, or
provide[] information helpful to . . . customers in connection with their travels.” 12
At times, however, national banks stand in as principal as a convenience to their
customers, while still acting in this broker-type role. As noted above, national banks routinely
act as financial intermediaries in riskless principal securities transactions. 13 In a similar broker-
type activity, national banks, as principal, borrow securities from custody customers for the
bank’s own account for purposes of lending those securities to third parties. Known as
“securities conduit lending,” the bank stands as an intermediary between its customer and a
third-party borrower, against whose credit risk the customer does not wish to be exposed. 14
8
NationsBank, 513 U.S. at 260 (“By providing customers with the opportunity to invest in one
or more annuity options, banks are essentially offering financial investment instruments of the
kind congressional authorization permits them to broker.”).
9
OCC, Interpretive Letter No. 499, Fed. Banking L. Rep. P 83,090, 1990 WL 538991, *2 (Feb.
12, 1990).
10
See OCC, Interpretive Letter No. 494, Fed. Banking L. Rep. P 83,083, 1989 WL 534987, *19
(Dec. 20, 1989) (“IL 494”) (“[T]he ‘business of banking’ powers clause of section 24 (Seventh)
includes the power for national banks to broker financial instruments for their customers. This
power grew out of historical banking practices and community expectations. It is a financial
activity, a part of banks’ broad function as financial intermediaries in the economy and
connected with banks’ power to trade as principal in many financial instruments. . . . Brokerage
of financial instruments is related to several of the express powers although not reducible to
them; and it has been widely recognized by Congress, courts, and commentators as a part of the
business of banking.”).
11
See, e.g., IL 494 at *19 (“Since agricultural futures and options, like other options and futures,
are financial instruments, traded in the financial markets for financial purposes, national banks
are empowered under section 24 (Seventh) to buy and sell them for customers.”).
12
Arnold Tours, Inc. v. Camp, 472 F.2d 427, 433 (1st Cir. 1972).
13
See IL 626, IL 371.
14
See OCC, Interpretive Letter No. 1026 (Apr. 27, 2005).
4
In a similar financial intermediation role, national banks have long acted as principal in
relation to their customers’ derivatives transactions. 15 Closely related to riskless principal
transactions, national banks may engage in perfectly-matched or portfolio-hedged customer-
driven derivative transactions that are physically-settled by transitory title transfer. 16 In a
perfectly-matched customer-driven derivative transaction, for example, a national bank enters
into a derivative with a customer and enters into another derivative with a different counterparty
that offsets the economic risk of the derivative with the initial customer. 17 If the derivative is
physically-settled by transitory title transfer, the national bank accepts title to the asset
underlying the derivative and then immediately relinquishes title to the asset to another party. 18
Settlement by transitory title transfer in the context of a perfectly-matched derivative transaction
is akin to a riskless principal transactions in that, in both types of transactions, (1) the bank acts
as a financial intermediary for a customer, 19 and (2) the bank takes ownership of an asset for a
moment in time before passing the asset along to another party. 20
Courts have noted that “the National Bank Act did not freeze the practices of national
banks in their nineteenth century forms.” 21 The fact here that the bank would act as a financial
intermediary for crypto-assets does not affect the bank’s authority to act as a financial
intermediary where the bank acts as a riskless principal, i.e., the equivalent of a broker.
In addition, acting as a riskless principal in crypto-assets for custody customers is a
logical outgrowth of the services that national banks may already provide for custody customers.
National banks may buy and sell financial and non-financial assets held in custody on a
15
See 12 C.F.R. § 7.1030.
16
12 C.F.R. § 7.1030(c)(4).
17
While portfolio-hedged transactions generally entail more complex hedging activity and may
entail greater residual risk, the principle is fundamentally the same.
18
See, e.g., 12 C.F.R. § 7.1030(b)(6); OCC, Interpretive Letter No. 962 (Apr. 21, 2003) (“IL
962”) (approving customer driven, electricity derivative transactions that involve transfer of title
to the underlying electricity).
19
In these transactions, the bank acts as a financial intermediary in the derivative, including
through the transfer of the underlying asset via transitory title transfer.
20
See IL 962 at 8 (comparing instantaneous title transfers as analogous to instantaneously
acquiring and transferring debt securities in the secondary market—i.e., in a riskless principal
capacity). In addition, perfectly-matched derivative transactions outside the context of transitory
title transfer are similar to riskless principal transactions in that, in both types of transactions,
(1) the bank acts as a financial intermediary for the customer, and (2) the bank eliminates its
market risk through offsetting transactions but retains credit risk. Unlike in a riskless principal
transaction, however, a perfectly-matched derivative transaction entails ongoing financial
obligations (for the duration of the offsetting derivatives), and attendant credit risk, rather than a
single set of offsetting purchases and sales, with limited credit risk.
21
M & M Leasing Corp. v. Seattle First Nat. Bank, 563 F.2d 1377, 1382 (9th Cir. 1977), cert.
denied, 436 U.S. 956 (1978).
5
customer’s behalf at the direction of the customer and in a manner consistent with the customer
agreement and applicable law. 22 Buying and selling crypto-assets for custody customers as
riskless principal at a custody customer’s direction is the economic equivalent to buying and
selling crypto-assets as agent for custody customers and is thus a logical outgrowth of a
recognized banking activity.
2. Whether the Activity Strengthens the Bank by Benefiting Its Customers or Its
Business
Several applicants have discussed how conducting riskless principal crypto-asset
transactions would benefit their proposed bank’s customers and business, including by offering
additional services in a growing market. Offering riskless principal crypto-asset transactions
would benefit bank customers by providing customers with more options and the ability to
receive a service provided by a highly regulated bank. Customers would be able to transact
crypto-assets through a regulated bank, as compared to non-regulated or less regulated options. 23
In offering riskless principal crypto-asset transactions, the bank interposes itself between
customer and counterparties with whom the customer may have no relationship. This can help
customers manage their exposure to unregulated crypto-asset exchanges and pseudonymous
counterparties on such exchanges, as well as provide the operational capacity needed to
undertake such transactions. 24 As discussed in the following section, national banks may also be
better positioned to manage any risks related to such interactions than their customers.
22
See OCC, Interpretive Letter No. 1170 (July 20, 2020) (“IL 1170”) (affirming that banks may
provide crypto-asset custody services, which may include services such as facilitating a
customer’s cryptocurrency and fiat currency exchange transactions, transaction settlement, trade
execution, recordkeeping, valuation, tax services, reporting, or other appropriate services);
Interpretive Letter No. 1184 (May 7, 2025) (“IL 1184”) (affirming that banks may buy and sell
assets held in custody at a custody customer’s direction and may outsource bank-permissible
crypto-asset activities, including custody and execution services to third parties, subject to
appropriate third-party risk management practices).
23
The crypto-asset industry has grown substantially over the past decade. See Raphael Auer, Ulf
Lewrick, and Jan Paulick, BANK FOR INTERNATIONAL SETTLEMENTS, BIS Working Papers No
1265: DeFiying gravity? An empirical analysis of cross-border Bitcoin, Ether and stablecoin
flows (May 2025) (finding that Bitcoin, Ether, Tether, and USD Coin accounted for over $600
billion in cross-border flows in the fourth quarter of 2024 alone). To the extent that national
banks offer riskless principal crypto-asset transactions, their clients would be able to conduct
more of their crypto-asset business within the confines of a regulated and supervised banking
market.
24
Compare this to securities conduit lending, discussed in part II.B.1. See also Merchants’ Nat.
Bank v. State Nat. Bank, 77 U.S. 604, 648 (Dec. 1, 1870) (“The practice of certifying checks has
grown out of the business needs of the country. They enable the holder to keep or convey the
amount specified with safety. They enable persons not well acquainted to deal promptly with
each other, and they avoid the delay and risks of receiving, counting, and passing from hand to
hand large sums of money.”).
6
Moreover, offering this service would also benefit the bank’s business by making the bank a
more attractive option for current and future customers. 25
3. Whether the Activity Involves Risks Similar in Nature to Those Already Assumed
by Banks
The key differences between a riskless principal crypto-asset transaction and a riskless
principal securities transaction are the underlying asset and the technology used to effect the
transactions. The main risk in riskless principal transactions is counterparty credit risk (in
particular, settlement risk). Likewise, the main risk in a perfectly-matched customer-driven
derivative transaction that settles by transitory title transfer is credit risk. In these activities, the
bank neutralizes its market risk through offsetting transactions but retains credit risk due
primarily to the ongoing financial obligations of the parties to the transaction. The bank does not
carry an inventory. A bank that acts as riskless principal in crypto-assets would face a similar set
of risks. In the event of a settlement default, the bank would face limited market risk but would
typically have in place procedures to sell the crypto-assets as soon as possible. 26 In instances
where the bank engages in other permissible crypto-asset activities, including, for example,
crypto-asset custody, 27 stablecoins, 28 and crypto-asset network fees, 29 it would be able to rely on
the infrastructure related to these offerings, further facilitating its ability to liquidate the relevant
crypto-assets. Managing counterparty credit risk is integral to the business of banking, and
banks are experienced in managing this risk.
Banks could also face operational risk associated with using new technology, but these
risks are the same as, and similar to, risks already assumed by national banks. As noted above,
national banks are permitted to engage in certain crypto-asset activities and thus have experience
settling transactions with crypto-assets on a distributed leger. Moreover, the risk presented from
settling a riskless principal crypto-asset transaction on a distributed ledger exists whether the
crypto-asset is a security or a non-security, and, as noted above, acting as a riskless principal for
25
By offering customers access to crypto-assets via riskless principal transactions, a bank may
offer its customers “a broader range of risk management products that more effectively address
their individual risk management needs, the [b]ank will have the ability to attract a broader
customer base” and, in “expanding its customer base, it may diversify and reduce credit and
other risks arising from its financial intermediation business.” OCC, Interpretive Letter No.
1073, 4 (Oct. 16, 2006).
26
In certain circumstances, banks may be able to use smart contracts to further mitigate
settlement risk (e.g., by implementing a contract to purchase or sell crypto-assets that executes
only if the offsetting transaction also executes).
27
See IL 1170 and IL 1184.
28
See OCC, Interpretive Letter No. 1174 (Jan. 4, 2021) (affirming that banks may act as nodes
on a distributed ledger technology network to verify customer payments and engage in certain
stablecoin activities to facilitate payment transactions on such network).
29
See IL 1186.
7
securities transactions is a long-established permissible activity. In addition, although settling a
transaction on a distributed ledger differs from settling a security transaction via book entry, the
two processes are analogous in many respects. 30 More generally, the OCC has long maintained a
technology neutral stance with regards to permissibility.31
4. Whether the Activity is Authorized for State-Chartered Banks
State banks have long engaged in riskless principal transactions with respect to
securities, 32 and state regulatory frameworks concerning crypto-asset activities conducted by
state banks are continuing to develop. 33 None of these state regulatory frameworks expressly
prohibit state banks from engaging in riskless principal crypto-asset transactions. In light of
developing state regulatory frameworks with respect to crypto-asset activities, and states banks’
clear authority to engage in riskless principal securities transactions, this factor does not weigh
against determining that national banks may engage in riskless principal crypto-asset
transactions.
III. Conclusion
Riskless principal crypto-asset transactions, as described above, are permissible under
12 U.S.C. § 24(Seventh). Different facts and circumstances could result in a different
conclusion. As with any activity, a bank that conducts riskless principal crypto-asset
transactions must do so in a safe and sound manner and in compliance with applicable law. The
OCC will examine riskless principal crypto-asset activities as part of its ongoing supervisory
process.
We trust that this is responsive to your inquiry.
Sincerely,
/s/
Adam J. Cohen
Senior Deputy Comptroller and Chief Counsel
30
Both types of transactions settle by means of updating electronic ledgers. In the case of
securities, that ledger is usually privately maintained. In contrast, many crypto-assets trade on
public distributed ledgers.
31
See 12 C.F.R. Part 7, Subpart E (National Bank Electronic Activities).
32
See, e.g., 17 C.F.R. § 240.3a5-1 (exempting from the definition of “dealer” banks engaged in
riskless principal transaction activities).
33
New York, California, and Wyoming, among others, have issued detailed regulations relating
to crypto-assets (e.g., 23 NYCRR 200 under the New York Financial Services Law; Cal. Fin.
Code § 3101 et seq.; Wyo. Stat. Ann. § 34-29-101 et seq.; Wyo. Admin. Code 021.0002.19).
8