Fed Imposes New Roadblock to Banks’ Crypto Business – FinTech


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Today, the Fed announced a new procedural requirement for banks seeking to engage in crypto business. Going forward, a bank must provide formal notice to its primary oversight contact at the Fed “prior to engaging in any activity related to cryptoassets.” This notification requirement applies to all bank holding companies, savings and loan holding companies and state-chartered member banks. The term “crypto-asset activity” includes, at a minimum, crypto-asset custodial services and traditional custodial services, ancillary custodial services, facilitation of purchases and sales of crypto-assets by customers, loans secured by crypto-assets, and the issuance and distribution of stablecoins.

The new requirement is set out in Oversight Letter No. 22-6, which directs institutions to have “adequate systems, risk management and controls in place to conduct crypto-asset-related activities in a safe and sound manner and in accordance applicable laws, including applicable consumer protection laws and regulations” before engaging in crypto activities. The Fed specifically calls stablecoins, “if widely adopted,” potentially problematic from a financial stability perspective.

The Fed’s action aligns it with the OCC’s approach to crypto business. Last November, the OCC announced that domestic banks must notify their OCC oversight office before engaging in crypto activities, including those that the OCC has already confirmed to be permitted, such as custodial activities. Taken together, the Fed and OCC actions mean a much tougher path for banks pursuing digital asset strategies.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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