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OCC Grants Conditional Approval for First National Cryptocurrency Trust Company
Practical Law Legal Update w-029-3156 (Approx. 4 pages)
OCC Grants Conditional Approval for First National Cryptocurrency Trust Company
by Practical Law Finance
| Published on 27 Jan 2021 • USA (National/Federal) |
The Office of the Comptroller of the Currency (OCC) issued a letter granting conditional approval of the conversion of Anchorage Trust Company, a South Dakota chartered trust company, to become Anchorage Digital Bank, National Association, the first cryptocurrency trust company approved by the OCC to operate under a national trust bank charter.
On January 13, 2021, the Office of the Comptroller of the Currency (OCC) issued a letter granting conditional approval of the conversion of Anchorage Trust Company, a South Dakota chartered trust company, to become a national bank with the title of Anchorage Digital Bank, National Association. Anchorage Trust offers digital asset and cryptocurrency custody services and is the first cryptocurrency trust company conditionally approved by the OCC to operate under a national trust bank charter.
Anchorage Trust is a non-depository public trust company organized under South Dakota law and offers custody services primarily to institutional investors that transact in digital assets and cryptocurrencies such as Bitcoin, Bitcoin Cash, Ethereum, Zcash, and Filecoin. Anchorage Trust's primary services include:
- Custody of digital assets.
- Custody of fiat currency (using a sub-custodian).
- Staking services.
- Settlement services.
The OCC conditionally approved the conversion of Anchorage Trust to a national trust bank under 12 USC 35 and 12 CFR 5.24, as well as its application to exercise fiduciary powers as a national bank under 12 USC 92a and 12 CFR 5.26. According to the letter, after its conversion, Anchorage Digital Bank will conduct its activities from its home office in South Dakota as well as through the internet on a nationwide basis.
The letter sets out certain requirements that Anchorage Digital Bank must satisfy on or before the effective date of the conversion, which include:
- Purchasing adequate fidelity bond coverage in accordance with 12 CFR 7.2013.
- Applying for membership in the Federal Reserve System.
- Ensuring all required regulatory approvals have been obtained.
- Ensuring that directors own qualifying shares in conformance with 12 USC 72 and 12 CFR 7.2005.
In addition, the approval of the conversion is subject to the following conditions under 12 USC 1818:
- Anchorage Digital Bank must limit its business to the operations of a trust company and must not engage in activities that would cause it to be a "bank" as defined in section 2(c) of the Bank Holding Company Act.
- Anchorage Digital Bank must enter into a written operating agreement with the OCC which sets out, among other things, capital and liquidity requirements and the OCC’s risk-management expectations.
- Within three business days after the effective date of the operating agreement, Anchorage Digital Bank must enter into a written:
- capital and liquidity support agreement with Anchor Labs, of which Anchorage Digital Bank is a wholly-owned subsidiary, and the OCC, setting forth Anchor Labs' obligation to provide capital and liquidity support to Anchorage Digital Bank if and when necessary; and
- capital assurance and liquidity maintenance agreement with Anchor Labs, also setting forth Anchor Labs' obligation to provide capital and liquidity support to Anchorage Digital Bank if and when necessary.
According to the OCC, the conversion must be completed within six months from the date of approval, or the approval will automatically terminate, unless the OCC grants an extension.