DLT Custody

State of play.

• Circle has achieved full OCC approval for First National Digital Currency Bank, N.A. — the first of five conditional-approval holders to reach operational status, establishing the compliance template the OCC expects from digital asset trust banks .
• Coinbase, Ripple, Paxos, BitGo, and Fidelity Digital Assets remain in the conditional phase, with Circle's approval now the benchmark for what satisfying AML/KYC operational standards looks like in practice .
• The IRS custodian-qualification requirement is a live compliance gate for crypto-IRA platforms, with a Trump executive order accelerating rollout of self-directed crypto IRAs and prohibited-transaction violations carrying immediate full-account taxation consequences .
• Morgan Stanley has filed for its own OCC national trust charter, signaling that the federal custody pathway is attracting TradFi incumbents alongside crypto-native applicants .
• For counsel advising digital asset custodians, institutional clients, or fintech firms, the practical baseline is that the US federal charter pathway is now proven — Circle's full approval sets the operational standard, and clients in the conditional queue or evaluating charter applications need to map their AML/KYC infrastructure against that template now.

Where things stand.

• Circle's full OCC approval is the operational template for US digital asset trust charters. First National Digital Currency Bank, N.A. is authorized for custody and digital asset settlement — no deposit-taking or lending — having satisfied specific AML/KYC operational standards during the conditional phase. The conditions Circle met have not been publicly disclosed, making the approval simultaneously a precedent and an information gap .
• The OCC national trust charter pipeline now spans crypto-native and TradFi applicants. Coinbase holds conditional approval; Morgan Stanley has filed; Ripple, Paxos, BitGo, and Fidelity Digital Assets remain conditional. The OCC's finalized national trust bank activities rule, effective April 2026, provides the regulatory foundation .
• Community bank challenges to OCC crypto charters remain in play. The outcome could unwind the federal pathway; an injunction would stall the entire conditional-approval queue .
• Crypto-IRA compliance is a distinct and high-stakes custodian-qualification issue. The IRS requires any platform holding IRA assets to qualify as a bank or obtain approval as a nonbank trustee or custodian. Prohibited-transaction violations trigger immediate taxation of the entire account balance. The Infrastructure Investment and Jobs Act broker reporting requirements for digital assets are effective in 2025, adding a parallel compliance layer .
• EU MiCA's transitional period has expired. Banks represent roughly 20% of EU CASP licensees, benefiting from a streamlined 40-day authorization pathway. Firms operating without a license after the July 1, 2026 deadline face enforcement — not a grace extension .
• The UK FCA regime is on a compressed but defined timeline. CP26/13 consultation has closed; final guidance is expected in autumn 2026; the authorization application window opens September 30, 2026 and closes February 28, 2027; the regime takes effect October 25, 2027. Firms that miss the application window face enforcement exposure from day one .
• Institutional custody consolidation is accelerating. Standard Chartered's reported consideration of a Zodia Custody buyout reflects a broader pattern of custody infrastructure being reintegrated into regulated banking operations as regulatory frameworks clarify .
• SEC clarification on application of federal securities laws to crypto assets has reshaped the qualified custody analysis for RIAs and VCs. The March 2026 Federal Register release is the current reference point for which digital assets trigger investment adviser custody obligations .

Latest developments.

• Circle receives full OCC approval for First National Digital Currency Bank, N.A. — the first conditional-approval holder to achieve operational status among the five firms granted initial approvals in December 2025 .
• Trump executive order accelerates crypto-IRA rollout; IRS custodian-qualification requirements, prohibited-transaction rules, and IIJA broker reporting obligations now govern a rapidly expanding product category offered by Directed IRA, Fidelity Digital Assets, and Gemini .

Active questions and open splits.

• What conditions did Circle satisfy — and what does that mean for the conditional queue? The OCC has not disclosed the specific operational standards Circle met to convert conditional to full approval. Until that template is public, firms in the conditional phase are calibrating against an opaque benchmark .
• Federal charter vs. state trust charter: preemption of custody and fiduciary obligations. A national trust charter's effect on state-level custody requirements — segregation, fiduciary duties, client asset treatment — remains unresolved. The OCC pathway does not automatically displace state law .
• Community bank challenge to OCC crypto charters. An injunction would stall the entire conditional-approval queue, including Coinbase and Morgan Stanley. The jurisdictional and statutory authority questions are live .
• IRS nonbank trustee/custodian approval: what qualifies? As crypto-IRA platforms proliferate, the IRS approval standard for nonbank custodians is under pressure. Whether existing approvals cover novel digital asset structures — staking, tokenized assets — is unresolved .
• MiCA passport scope for custody services across member states. Whether a CASP license in one EU jurisdiction provides clean passporting for custody specifically, or whether host-state rules impose additional requirements, is not uniformly resolved .
• UK perimeter ambiguity for hybrid custody products. The FCA has flagged lending, borrowing, and staking bundled with custody as requiring specific analysis under CP26/13 — whether these are single-authorization or multi-authorization activities turns on the final guidance .
• Segregation and insolvency treatment of custodied digital assets. Across US, EU, and UK frameworks, the treatment of client digital assets in a custodian insolvency remains incompletely resolved — a live exposure for institutional clients holding assets with newly licensed or chartered entities .

What to watch.

• Whether the OCC publicly discloses the conditions Circle satisfied — that disclosure would define the compliance roadmap for every firm in the conditional queue.
• Whether Coinbase, Ripple, Paxos, BitGo, or Fidelity Digital Assets achieves full OCC approval next, and whether the timeline compresses following Circle's precedent.
• Outcome of the community bank challenge to OCC crypto charters — an injunction would be the single most disruptive event for the US federal custody pathway.
• FCA final guidance on CP26/13 expected in autumn 2026 — the perimeter rules for hybrid custody products will determine authorization scope for the September 30 application window.
• IRS guidance on nonbank trustee/custodian qualification standards as crypto-IRA product complexity increases — particularly whether staking and tokenized asset structures fall within existing approvals.
• Standard Chartered's final decision on Zodia Custody — a completed buyout would be the clearest signal that institutional custody is consolidating inside regulated banking entities rather than standalone vehicles.