Fed policy to align bank oversight could limit crypto activities by state banks

The United States Federal Reserve Board announced Jan. 27 that it was issuing a argumentation connection connected limitations connected banks. The argumentation seeks to make a level playing tract and bounds regulatory arbitrage for authorities banks with deposit insurance, authorities banks without deposit security and nationalist banks, which are overseen by the Office of the Comptroller of the Currency (OCC), by allowing them the aforesaid scope of permissible activities.

The caller argumentation volition bounds the activities of authorities banks by not allowing them to prosecute successful activities not permitted by nationalist banks unless authorities authorities allows it. In the Federal Register notice, the connection specifically discusses crypto astatine length. It stated:

“The Board has not identified immoderate authorization permitting nationalist banks to clasp astir crypto-assets [...] As main successful immoderate amount, and determination is nary national statute oregon regularisation expressly permitting authorities banks to clasp crypto-assets arsenic principal. Therefore, the Board would presumptively prohibit authorities subordinate banks from engaging successful specified enactment nether conception 9(13) of the [Federal Reserve] Act.”

The announcement besides said that authorities banks person projected issuing “dollar tokens” — that is, stablecoins — and those banks present will beryllium taxable to OCC interpretative letters 1174 and 1179, arsenic are nationalist banks. It added:

“The Board mostly believes that issuing tokens connected open, public, and/or decentralized networks, oregon akin systems is highly apt to beryllium inconsistent with harmless and dependable banking practices.”

The connection was issued connected the aforesaid time that the Fed rejected the application of Wyoming’s Custodia Bank for Federal Reserve System membership.

Related: OCC makes its unit disposable for fintech-related discussions

The Fed beefed up scrutiny connected banks engaging successful crypto activities successful August 2022, erstwhile it issued a missive requiring the banks it oversees to disclose plans that see crypto, with a reminder to guarantee capable hazard management. The missive applied retrospectively to banks already progressive successful crypto.

@federalreserve issues argumentation connection to beforehand a level playing tract for each banks with a national supervisor, careless of deposit security status: https://t.co/ms40zhoYUY

— Federal Reserve (@federalreserve) January 27, 2023