The Federal Reserve Board (the “FRB”) issued Supervision and Regulation Letter 22-6 (“SR 22-6”), offering steering for FRB-supervised banking organizations (referred to collectively herein as “FRB banks”) in search of to have interaction in actions associated to cryptocurrency and different digital belongings. The letter states that previous to partaking in crypto-asset-related actions, such FRB banks should make sure that their actions are “legally permissible” and decide whether or not any regulatory filings are required. SR 22-6 additional states that FRB banks ought to notify the FRB previous to partaking in crypto-asset-related actions. Any FRB financial institution that’s already engaged in crypto-asset-related actions ought to notify the FRB promptly relating to the engagement in such actions, if it has not already accomplished so. The FRB additionally encourages state member banks to contact state regulators earlier than partaking in any crypto-asset-related exercise.
These necessities ship a transparent message to FRB banks and actually to all banks that their crypto-asset associated actions are thought-about to be dangerous and to not be entered into evenly.
Certainly, the FRB famous that crypto-asset-related actions could pose dangers associated to security and soundness, shopper safety, and monetary stability, and thus a FRB financial institution ought to have in place ample techniques, danger administration, and controls to conduct such actions in a protected and sound method and in line with all relevant legal guidelines.
SR 22-6 is just like steering beforehand issued by the OCC and FDIC; in all circumstances, the companies require banks to inform regulators earlier than partaking in any type of digital asset exercise, together with custody actions. The three companies additionally launched a joint statement final November by which they pledged to supply larger steering on the difficulty in 2022. Additional, in an August 17, 2022 speech, FRB Governor Bowman said that the FRB workers is working to articulate supervisory expectations for banks on quite a lot of digital asset-related actions, together with:
custody of crypto-assets
facilitation of buyer purchases and gross sales of crypto-assets
loans collateralized by crypto-assets, and
issuance and distribution of stablecoins by banking organizations
Curiously, SR 22-6 comes just a few days after a gaggle of Democratic senators despatched a letter to the OCC requesting that the OCC withdraw its interpretive letters allowing nationwide banks to have interaction in cryptocurrency actions and a day after Senator Toomey despatched a letter to the FDIC questioning whether or not it’s deterring banks from providing cryptocurrency providers.
Though previous steering already required banks to inform regulators of crypto exercise, this steering doubtless may discourage further banks from coming into into crypto-related actions sooner or later or from including further crypto providers. In the long run, it may have the unlucky impact of constructing it tougher for cryptocurrency firms to acquire banking providers.
Copyright 2022 Ok & L GatesNationwide Regulation Evaluation, Quantity XII, Quantity 230