US Crypto Regulation Weekly Roundup: Major Legal Shifts Reshape Industry

OCC Allows Banks to Offer Crypto Custody and Stablecoin Services Without Prior Approval

The Office of the Comptroller of the Currency (OCC) has confirmed that national banks can now offer crypto custody and stablecoin services without requiring prior regulatory approval. This change, articulated in Interpretive Letter 1183, allows banks and federal savings associations to engage in these activities under existing banking regulations. The OCC mandates that banks implement robust risk management controls akin to those in traditional banking when carrying out crypto-related tasks. Acting Comptroller Rodney E. Hood emphasized the importance of maintaining strong risk management for novel banking activities. 

Furthermore, the OCC has removed prior requirements for supervisory nonobjection related to crypto activities and withdrawn earlier joint statements warning about crypto-asset risks. This regulatory update signals a significant shift towards integrating crypto activities within the federal banking system, promoting a consistent regulatory approach across various technologies while reducing the operational burdens on banks.

White House Backs Resolution to Overturn IRS DeFi Reporting Rule Amid Privacy Concerns

The White House supports a congressional resolution, S.J. Res. 3, aimed at repealing an IRS rule that imposes significant disclosure requirements on decentralized finance (DeFi) platforms. Introduced by Senator Ted Cruz and Representative Mike Carey, the rule expands the definition of "broker" to include software processing DeFi transactions, requiring detailed reporting of crypto sales and taxpayer data. This has raised privacy concerns within the crypto industry, prompting a backlash from organizations like the Blockchain Association, which argue it misinterprets DeFi technology and threatens innovation. 

The White House warns that the rule, deemed a burdensome regulation issued at the end of the previous administration, stifles American innovation and raises privacy issues. With the Senate poised to vote this week on revoking this and another regulation related to digital assets, the President's advisors are prepared to support the resolution if passed.

SEC Drops Lawsuit Against Crypto Exchange Kraken, Signaling Regulatory Shift

The SEC has agreed to drop its lawsuit against the crypto exchange Kraken, which was originally filed in November 2023 for alleged securities law violations, claiming Kraken operated as an unregistered online trading platform and mishandled customer funds. The agreement comes without any admission of wrongdoing, penalties, or changes to Kraken's business model. Kraken views this decision as a significant victory, stating it marks a turning point for the future of cryptocurrency in the U.S. by lifting regulatory uncertainties that hinder innovation and investment. 

The dismissal adds to a series of recent SEC actions, including the withdrawal of lawsuits against other exchanges such as Coinbase, Gemini, MetaMask, OpenSea, Robinhood, and UniSwap. This trend suggests a potential shift in regulatory approach, highlighting a growing recognition of the need for a stable and forward-thinking framework for the evolving crypto market.

SEC Closes Investigation into Yuga Labs After Three Years

Yuga Labs has announced that the US Securities and Exchange Commission (SEC) has concluded its investigation into the company after more than three years. The news, shared on March 3 via a post on X, is considered a significant victory for the NFT sector and its creators. The SEC's investigation, initiated in October 2022, aimed to determine whether certain NFTs from Yuga Labs were operating like traditional stocks and thus should be classified as securities. The inquiry began under former Chairman Gary Gensler as part of a larger examination of the NFT market.