Banking Regulators Withdraw Statements That Discouraged Bank Involvement With Crypto

The Federal Deposit Insurance Corp. (FDIC) and the Federal Reserve have withdrawn earlier warnings that cast a chill over banks’ involvement with cryptocurrencies.

When announcing the moves Thursday (April 24), the banking regulators said they aim to signal a new regulatory openness to banks engaging in digital asset activities, provided they do so prudently and within the bounds of existing law.

The FDIC and the Fed withdrew two joint statements that were issued on Jan. 3, 2023, and Feb. 23, 2023, and addressed crypto-asset risks and liquidity risks resulting from crypto-asset market vulnerabilities, the FDIC said in a Thursday press release.

In its own press release about these moves, the Federal Reserve said the regulators withdrew their “Joint Statement on Crypto-Asset Risks to Banking Organizations” and their “Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities.”

In addition to withdrawing those joint statements, the Federal Reserve said in the release that it is rescinding its 2022 supervisory letter that said state member banks must provide it with advance notification of crypto-asset activities and its 2023 supervisory letter regarding “the supervisory nonobjection process for state member bank engagement in dollar token activities.”

The Federal Reserve said in the release that it will now use the normal supervisory process to monitor banks’ crypto-asset activities.

“These actions ensure the Board’s expectations remain aligned with evolving risks and further support innovation in the banking system,” the release said.

Another banking regulator, the Office of the Comptroller of the Currency (OCC), reclarified certain crypto banking permissions on March 7.

In its Interpretive Letter 1183, the OCC the OCC confirmed that crypto-asset custody, certain stablecoin activities and participation in independent node verification networks such as distributed ledger are permissible for national banks and federal savings associations.

Acting Comptroller of the Currency Rodney E. Hood said in a March 7 press release that the OCC expects banks to apply the same risk management controls to novel bank activities as they do to traditional ones and that the OCC will treat these bank activities consistently, “regardless of the underlying technology.”

The FDIC said in its Thursday press release that it, the Fed and the OCC, “are exploring issuing additional clarity with respect to banking organizations’ crypto-asset and related activities in the coming weeks and months.”