FDIC: Banks no longer need prior approval for crypto activities

Banks no longer need to secure FDIC approval for certain crypto-related activities, according to a March 28 notice from the agency. .Covered activities include being crypto-asset custodians; keeping stablecoin reserves; issuing crypto and other digital assets; and participating in blockchain- and distributed ledger-based settlement or payment systems. Banks that want to serve crypto-assets and digital assets must still “adequately manage the risks,” according to the FDIC. Acting Chair Travis Hill said the notice followed “the flawed approach of the last three years. “I expect this to be one of several steps the FDIC will take to lay out a new approach for how banks can engage in crypto- and blockchain-related activities in accordance with safety and soundness standards,” Hill added. During his four years in office, the Biden administration had called on Congress to expand regulatory oversight of the crypto space and tighten transparency and disclosure requirements for crypto companies. Biden also supported worsening the penalties for violating illicit finance requirements while banning crypto intermediaries from tipping off criminals. Earlier in March, the Office of the Comptroller of the Currency revised its crypto-related guidance, telling banks that they no longer need permission to engage in certain activities. In January, Federal Reserve Chair Jay Powell expressed confidence that banks can effectively serve crypto customers. “We think banks are perfectly able to serve crypto customers as long as they understand and can manage the risks and as long as it is safe and sound,” he said. President Donald Trump has personally embraced decentralized finance, with he and his sons launching crypto venture World Liberty Financial last year during the presidential campaign. The FDIC expects to continue engaging with the President’s Working Group on Digital Asset Markets and expects to release further guidance to provide more clarity on banks’ engagement in crypto-related activities. The FDIC also expects to work with other banking agencies to release new documents related to crypto-assets or issue further guidance or regulations. American Bankers Association President and CEO Rob Nichols applauded the decision. “This important step removes an obstacle that led banks to engage more cautiously in the digital asset market, which has prevented customers from obtaining innovative products and services through their trusted bank relationships,” he said.