Fed Issues Guidelines to Weigh Crypto Requests from Non-FDIC Insured Banks | ABA banking journal-TheFM
The Federal Reserve today issued guidance on how it would assess applications from state-registered but non-FDIC-insured financial institutions seeking to engage in new business, such as those involving cryptocurrencies. assets. At the same time, the agency reiterated that such activities must be carried out “in a safe and healthy manner”.
The policy statement came the same day the agency refused a request from Wyoming-based digital asset firm Custodia Bank to become a member of the Federal Reserve. The Fed said the company does not have federal deposit insurance and is offering to engage in “untested” crypto activities that “pose significant security and soundness risks.” Custodia is one of many crypto firms and other new payment companies that have received noncustodial state charters and have sought access to Fed master accounts without the structures applied to FDIC-insured banks. Last year, the American Bankers Association asked for the fed clarify these charters.
In a statement, the Fed said it was seeking to promote a level playing field for all banks with a federal supervisor, regardless of deposit insurance status. Still, supervised banks “will be subject to the same limitations on activities, including new banking activities, such as activities related to crypto-assets,” according to the agency. In response to a number of inquiries from banks over the years regarding engagement in crypto-assets, the statement clarifies how the Fed would assess such inquiries “in accordance with long-standing practice.”
“Today’s action would not prohibit a Member State bank, or a potential candidate, from providing custodial services, as a depositary, for crypto-assets if conducted in a safe and sound manner and in compliance with consumer, anti-money laundering and anti-terrorist financing laws,” the Fed said.
White House Releases Crypto Regulation ‘Roadmap’
Also on Friday, the Biden administration presented a roadmap to mitigate cryptocurrency risk, saying he will prioritize research on digital assets and call on Congress to pass legislation protecting consumers. In a statement, the White House called 2022 “a tough year for cryptocurrencies,” alluding to the implosion of stablecoin TerraUSD in May and the subsequent collapse of FTX. “Many ordinary investors who have trusted cryptocurrency companies, including young people and people of color, have suffered severe losses, but thankfully the turmoil in the cryptocurrency markets has had little impact. negative impact on the broader financial system to date,” the administration said.
In the coming months, the administration will also unveil priorities for digital asset research and development, “which will help the technologies powering cryptocurrencies protect consumers by default,” the White House said. He also urged Congress to expand the power of regulators to prevent misuse of client assets and to mitigate conflicts of interest; strengthen transparency and disclosure requirements for cryptocurrency companies; strengthen penalties for violations of illicit finance rules and subject cryptocurrency intermediaries to bans on reporting criminals; fund greater law enforcement capacity building, including with international partners; and limit the risks of cryptocurrencies to the financial system by following the steps outlined by the Financial Stability Oversight Board in a recent report.