On Thursday April 7, the Federal Deposit Insurance Corporation (FDIC) announced that it will require all the institutions that it supervises to notify if they are engaged or intent to engage in any activity involving or related to crypto assets. The FDIC will review the information and provide relevant supervisory feedback.
“Crypto–related activities may pose significant safety and soundness risks as well as financial stability concerns, and it is difficult for institutions to adequately assess the safety and soundness, financial stability, and consumer protection implications without considering each crypto-related activity on an individual basis.”
Interestingly, the regulator already warned that the “inclusion of an activity within this listing [of crypto-related activities] should not be interpreted to mean that the activity is permissible for FDIC-supervised institutions.”
The letter issued by the FDIC doesn’t provide many details about the notification or reviewing processes. Institutions should notify FDIC as soon as possible if they intend to engage in these activities (or if they are already engaged) and the FDIC will provide feedback “in a timely manner.”
The activities to report include a long list of activities with crypto assets, defined as digital assets implemented using cryptographic techniques. The list includes institutions acting as crypto-asset custodians; maintaining stablecoin reserves; issuing crypto and other digital assets; acting as market makers or exchange or redemption agents; participating in blockchain- and distributed ledger-based settlement or payment systems, including performing node functions; as well as related activities such as finder activities and lending.
The FDIC also warned that this is an open-ended list based on “known existing or proposed crypto-related activities engaged in by FDIC-supervised institutions, but given the changing nature of this area, other activities may emerge that fall within the scope of this Financial Institution Letter.”
The request comes as U.S. banking regulators admit the increasing popularity of cryptocurrencies. Last month, U.S. President Joe Biden issued an executive order asking government agencies to evaluate the risks and benefits of crypto assets, which may be seen as a first step to regulate this industry.
The FDIC is not the only banking regulator that is turning its attention to crypto activities. Office of the Comptroller of the Currency (OCC) head Michael Hsu has recently warned banks that trading crypto derivatives could result in extra regulatory scrutiny. “Before banks move too much farther down this path, they should carefully consider the tail risks of trading crypto derivatives,” said Mr. Hsu. Today, April 11, Hsu is expected to deliver a speech at a virtual event on stablecoin regulation.
Read Also: Gensler Says SEC Plans to Regulate Crypto Exchanges, Sharing Power With CFTC
Not only banks and financial institutions may need to follow new supervisory rules. More oversight is on its way for crypto exchanges too. The Securities and Exchange Commission (SEC) is planning a series of changes that could aggressively step up its regulation of the cryptocurrency industry, most notably in the oversight and functioning of both centralized and decentralized exchanges.
The commission, he announced on Monday, is planning to regulate both centralized and decentralized exchanges involved in trading or lending cryptocurrencies by requiring them to register with the agency.
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