The Office of the Comptroller of the Currency (OCC) is clearing a path for national banks engaging with public blockchain infrastructure. Its latest guidance, Interpretive Letter #1186 (IL 1186), issued November 18, addresses key operational hurdles.
On the surface, the letter authorizes banks to hold native crypto-assets (like ETH) "as principal" for non-speculative purposes such as paying network fees and testing platforms.
This clarification removes fragile workarounds like third-party fee payments or real-time conversions. It aligns with how banks already hold foreign currency to operate cross-border rails. For context on how this fits within the broader U.S. regulatory landscape, the letter is another step in a methodical approach to blockchain infrastructure.
But the operational fix is only part of the story. The more interesting implications are in the OCC's rationale, which suggests a regulatory pathway for banks to move beyond merely using blockchain networks to actively securing them.
The "Inextricable" Link: Validation and Fees
What matters most in IL 1186 isn't just the authorization to pay fees—it's the rationale for authority to receive them.
The OCC referenced prior guidance (IL 1174) establishing that banks can "validate, store, and record payments transactions by serving as a node on a [distributed ledger]." Crucially, IL 1186 (Section II.A.2) connects the act of validation with the economic incentive:
The primary function of nodes, like payments rails, is to validate and settle transactions, with the implicit understanding that such service is done in return for a fee. It follows that if serving as a node is permissible, accepting the crypto-asset network fee paid to a node to validate a transaction is similarly permissible since the two are inextricable.
This matters because in Proof-of-Stake networks like Ethereum, "validating and settling transactions" in return for a "network fee" is exactly what staking means.
This implies much more than running a passive, archival node that merely observes the network. It suggests active participation in consensus—proposing and attesting to blocks and earning rewards for securing the network. Banks exploring this infrastructure layer can review available network provider integrations for connecting to public blockchain rails and payment networks.
A Challenge to the Compliance Orthodoxy
If this interpretation holds, it represents a significant departure from the conventional wisdom that has dominated banking compliance departments for years.
It has long been an article of faith among many legal and compliance professionals that national banks could never validate transactions on a public, permissionless blockchain. The entrenched argument was that a bank validator would be unable to conduct required AML/KYC and sanctions screening on every single transaction within a block it processes.
This perspective often created a regulatory impasse, attempting to force decentralized infrastructure into a compliance framework designed 50 years ago for centralized intermediaries. Critics have argued that this rigid interpretation would not stop the development of public blockchains; it would simply ensure that U.S. banks are sidelined from the foundational layer of the future financial system.
IL 1186 suggests the OCC may be adopting a more practical stance—one that recognizes infrastructure requires different regulatory treatment than applications. The OCC seems to be signaling that compliance challenges at the base layer shouldn't preclude bank participation entirely. Institutions looking to build compliant stablecoin infrastructure can explore tools for protocol design and smart contract development that align with these evolving frameworks.
For the primary regulator of the U.S. banking system to suggest this path, that's notable.
Strategic Necessity in a Changing Landscape
This guidance provides more than just operational relief; it opens the door for new strategic models at a critical juncture.
The financial landscape is rapidly evolving. Non-bank stablecoin issuers are capturing significant transaction volume, putting pressure on traditional payment revenues. Furthermore, the industry is increasingly questioning the return on investment for purely private, permissioned DLT platforms when compared to the network effects of public chains.
In this environment, banks need viable ways to engage with the broader crypto ecosystem. IL 1186 offers a compelling alternative:
- New Business Lines: Banks may be able to move beyond custody and payments, generating revenue by offering institutional-grade validation and staking services for public networks.
- Infrastructure Relevance: Participating in the security of public infrastructure offers a long-term strategy for banks to remain relevant as the financial system becomes increasingly decentralized.
The Guardrails Remain
Note that IL 1186 is tightly constrained. It is not an authorization for speculative trading or market-making. The OCC mandates strict guardrails:
- Non-Speculative Purpose: Holdings must be strictly for operational needs (gas fees, testing, or potentially validation activities).
- De Minimis Holdings: The total value of crypto held as principal must remain de minimis relative to the bank's capital.
- Risk Management: Banks must implement robust risk and compliance frameworks covering operational, liquidity, cybersecurity, and illicit finance risks.
Conclusion
By solving the immediate challenges of network fees, OCC Interpretive Letter 1186 allows banks to operate more efficiently in the digital asset space. But its lasting legacy may be the implicit pathway it provides for institutional staking.
By affirming the permissibility of validation and the acceptance of associated fees, the OCC is challenging long-held assumptions and potentially unlocking the role of U.S. banks as core participants in public blockchain infrastructure.
Key takeaway
The fine print in regulatory guidance often reveals more than the headlines suggest. IL 1186 may be remembered not for authorizing gas fee payments, but for laying the groundwork for a fundamental shift in how traditional banking institutions can engage with the infrastructure layer of Web3.
