FDIC Clarifies Process for Banks to Engage in Crypto-Related Activities
Summary:
On April 7, 2022, the FDIC issued a Financial Institution Letter (FIL-16-2022) titled Notification of Engaging in Crypto-Related Activities, which established a prior notification requirement for FDIC-supervised institutions that wish to engage in crypto-related activities. The FDIC is rescinding FIL-16-2022 and providing new guidance to clarify that FDIC-supervised institutions may engage in permissible crypto-related activities without receiving prior FDIC approval.
Statement of Applicability: The contents of, and material referenced in, this FIL apply to all FDIC-supervised financial institutions.
Highlights:
The FDIC is rescinding FIL-16-2022 and providing new guidance for FDIC-supervised institutions engaging or seeking to engage in crypto-related activities.1
This FIL affirms that FDIC-supervised institutions may engage in permissible activities, including activities involving new and emerging technologies such as crypto-assets and digital assets, provided that they adequately manage the associated risks. The FDIC expects that FDIC-supervised institutions conduct all activities in a safe and sound manner and consistent with all applicable laws and regulations.
In contrast to FIL-16-2022, which established a prior notification requirement specific to crypto-related activities, this FIL clarifies that FDIC-supervised institutions may engage in permissible2 crypto-related activities without receiving prior FDIC approval. As with all other activities, FDIC-supervised institutions should consider the associated risks—including, but not limited to, market and liquidity risk; operational and cybersecurity risks; consumer protection requirements; and anti-money laundering requirements—and should engage with their supervisory team as appropriate.3
The FDIC will continue to engage with the President’s Working Group on Digital Asset Markets and expects to issue further guidance in the future to provide additional clarity regarding banks’ engagement in particular crypto-related activities.
The FDIC will also work with the other banking agencies to replace interagency documents issued in January 20234 and February 20235 related to crypto-assets with further guidance or regulations.
| 1 | Crypto-related activities include, but are not limited to, 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. |
| 2 | See, e.g., Office of the Comptroller of the Currency, Authority of a National Bank to Provide Cryptocurrency Custody Services for Customers (July 22, 2020) (Interpretive Letter #1170); Office of the Comptroller of the Currency, OCC Chief Counsel’s Interpretation on National Bank and Federal Savings Association Authority to Hold Stablecoin Reserves (Sept. 21, 2020) (Interpretive Letter #1172); Office of the Comptroller of the Currency, OCC Chief Counsel’s Interpretation on National Bank and Federal Savings Association Authority to Use Independent Node Verification Networks and Stablecoins for Payment Activities (Jan. 4, 2021) (Interpretive Letter #1174). |
| 3 | See, e.g., Federal Deposit Insurance Corporation, Risk Management Manual of Examination Policies, “Basic Examination Concepts and Guidelines” (last updated Mar. 2022); Federal Deposit Insurance Corporation, FIL-35-2021, Request for Information on Digital Assets (May 17, 2021). |
| 4 | See Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Joint Statement on Crypto-Asset Risks to Banking Organizations (Jan. 3, 2023). |
| 5 | See Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities (Feb. 23, 2023). |