US Banks Can Now Hold Crypto for Gas Fees: Unlocking On-Chain Operations

US Banks Can Now Hold Crypto for Gas Fees: Unlocking On-Chain Operations

A significant development has emerged from the Office of the Comptroller of the Currency (OCC), the primary regulator for national banks in the United States. Following an inquiry from an unnamed national bank about holding cryptocurrency on its balance sheet for blockchain services, the OCC issued Interpretive Letter 1186 on November 18. This pivotal ruling confirms that national banks are now permitted to hold native digital assets essential for paying blockchain "network fees." This move substantially reduces a major hurdle, allowing regulated financial institutions to conduct on-chain operations without needing cumbersome external workarounds.

The letter explicitly designates the payment of blockchain "network fees," commonly known as gas, as an activity "incidental to the business of banking." Crucially, it clarifies that a national bank may hold these crypto assets as a principal, provided there is a "reasonably foreseeable" operational need. This seemingly straightforward clarification has profound implications. Previously, banks aiming to custody digital tokens, move stablecoins, or run tokenized deposits on public blockchains like Ethereum faced a fundamental operational barrier: you cannot settle transactions on these networks if you are not allowed to hold their native currency, such as ETH for Ethereum. These native assets are vital for incentivizing network participants to process and validate transactions, making gas a necessary component of any on-chain activity.

Overcoming Previous Operational Hurdles

Before this ruling, many banks either completely avoided on-chain activity, thereby limiting their engagement with the evolving digital asset space, or they relied on third-party providers. These intermediaries would front the gas fees for bank transactions, bundling costs into a fiat fee. While functional, this approach introduced layers of operational complexity, counterparty risk, and often higher costs. The OCC's new guidance enables banks to internalize these functions, directly holding the native tokens required to keep their on-chain operations running efficiently. This shift is particularly beneficial for large custodians, specialized tokenization desks, and stablecoin issuers, helping them achieve a more integrated, "full-stack" presence on specific networks.

Connecting to Broader Regulatory Frameworks

Interpretive Letter 1186 is not an isolated ruling; it explicitly links to activities already permissible under the GENIUS Act stablecoin framework. The OCC acknowledged that stablecoin operations inherently require banks to pay network fees, either "as agent for the customer or as part of its custody operations." Furthermore, this letter builds upon earlier policy clarifications that eased previous requirements for banks to seek prior approval for any crypto activity. These previous changes reaffirmed banks' ability to engage in crypto custody, certain stablecoin activities, and distributed ledger network participation, subject to standard risk management. The latest letter, therefore, addresses a specific, practical impediment within this broader, more permissive regulatory landscape: the inability to perform on-chain custody or run tokenized deposit programs without the authority to hold gas tokens.

As American Banker reported, the OCC’s logic is clear: if serving as a node on a blockchain network is permissible for banks, then "accepting the crypto asset network fee" and holding it for some period must also be acceptable. Without this allowance, a bank would be "practically barred" from engaging in an otherwise lawful activity.

This reasoning provides a cleaner path for large custodians to maintain a modest in-house gas balance, reducing reliance on external fintech intermediaries. The letter also permits banks to hold limited amounts of crypto as principal for testing permissible crypto-asset platforms, whether built internally or sourced externally. This means the OCC is effectively sanctioning small, working inventories of native tokens, allowing banks to safely test blockchain rails before deploying customer funds or balance sheet capital into production.

Impact on Custody and Payments

For payments and settlement, this ruling is fundamentally about operational infrastructure, not speculative trading. It primarily benefits banks running stablecoin operations or tokenized deposit programs that settle on public chains. These institutions now have explicit regulatory authority to hold the necessary gas to process customer transactions, eliminating the need for complex workarounds or dependence on external liquidity providers. The guidance also covers situations where the bank pays fees on behalf of customers in its role as custodian or agent, especially for GENIUS-compliant stablecoins.

It is consistently emphasized that these holdings are strictly limited to "operational needs," including fee buffers for settlement and platform testing, and do not permit open-ended speculative positions. This distinction is crucial: banks can hold enough ETH, for instance, to cover foreseeable transaction volumes, but they are expressly prohibited from building a speculative book or treating native tokens as an investment asset for their treasury. For custody desks, this ruling reduces counterparty risk and operational complexity, as banks can now internalize gas management. This streamlines execution and enhances their ability to compete with crypto-native custodians.

Lingering Constraints and Regulatory Divergence

Despite the positive clarification, the OCC stresses that all activities must be conducted in a "safe and sound" manner, adhering to existing laws and robust risk management frameworks (market, liquidity, operational, cyber, BSA/AML). A significant challenge, however, arises from regulatory divergence. While the OCC oversees national banks, the Federal Reserve, in a separate policy statement, has continued to describe holding crypto as principal as "unsafe and unsound" for state member banks. This creates friction and a "two-tier system" where permissibility often depends on a bank’s charter type and primary regulator.

Banks must also meticulously manage price volatility. Native tokens like ETH are inherently volatile, meaning the dollar value of a bank's gas inventory can fluctuate daily. The OCC’s "reasonably foreseeable operational need" standard implies conservative sizing of buffers, avoiding excess tokens that would expose banks to speculative risk. This necessitates a delicate balance: holding too little gas risks operational paralysis during high congestion, while holding too much implies carrying volatile assets without clear operational justification.

Broader Industry Implications and the Path Ahead

Interpretive Letter 1186 addresses the fundamental question of whether US banks can genuinely participate in on-chain finance without being structurally disadvantaged. For years, banks were often restricted to off-chain services or relied heavily on third parties for direct token handling. This latest letter removes the last significant operational blocker, enabling banks to hold the gas needed to settle transactions. If this stance holds, national banks with existing tokenization or stablecoin programs are likely to bring gas management in-house, consolidating more services within regulated institutions and reducing reliance on fintech intermediaries.

This ruling also sets a precedent for how regulators might approach other operational necessities involving native token holdings, potentially paving the way for future bank participation in areas like staking or decentralized finance. However, a key risk is that this permissive stance remains exclusive to the OCC. If the Federal Reserve does not issue similar guidance for state member banks, it could result in a fragmented regulatory landscape, potentially pushing more institutions towards national charters for crypto-related businesses. For now, Letter 11186 grants permission, but true policy convergence across all US regulators remains a crucial next step, defining the ultimate scope of US banks' engagement in the digital asset space.