By Pete Schroeder

WASHINGTON, (Reuters) – U.S. banks need to seek permission in writing from bank supervisors prior to engaging in cryptocurrency-related activities. This was a key regulator that said Tuesday.

The Office of the Comptroller of the Currency stated that banks should be able demonstrate their ability to manage risk before they can provide services such as custody for crypto-holding customers.

“Because many of these technologies and products present novel risks, banks must be able to demonstrate that they have appropriate risk management systems and controls in place to conduct them safely,” said acting Comptroller Michael Hsu in a statement.

After the former president Donald Trump opened the door for crypto-related work by the bank, the regulator now has a stricter stance.

The new interpretation letter states that banks cannot engage in crypto-related activities such as custody of crypto assets or using dollars deposits and reserves for “stablecoins” without notifying bank supervisors.

The bank’s risk management systems and tools will be reviewed by supervisors. Only banks that can demonstrate safe and sound operations are allowed to proceed with the transaction.

Separately, OCC and Federal Deposit Insurance Corporation released a joint statement on Tuesday stating that regulators of banking intend to clarify in 2022 which role traditional banks will legally have in cryptocurrency markets.