Any institute under Federal Deposit Insurance Corporation supervision considering engaging in a crypto-related activity needs to notify the FDIC. Institutes need to explain their intent by giving information to the FDIC in Massapequa, New York. The FDIC wants open dialogues with institutes about risks related to their activities.
The FDIC’s financial institution letter
The FDIC’s financial institution letter on April 7th changed banking and finance law. Most FDIC-supervised financial institutions are state-chartered banks without Federal Reserve System memberships. The FDIC-supervised institutes must notify the agency about any crypto-related activities. The crypto-related activities include maintaining coin reserves or acting as crypto-asset custodians. Other crypto-related activities the FDIC is monitoring include issuing cryptocurrencies or digital assets, acting as exchange or redemption agents or participating in blockchain. The FDIC monitors ledger-based payment systems, including finder activities and lending.
Current crypto activities of FDIC-supervised institutes
The new FDIC regulations make two statements about the crypto-activities of the institutes. First, FDIC-supervised institutes should have an open dialogue about future crypto-related activities. Second, FDIC-supervised institutions engaging in crypto-related activities should notify the FDIC. The FDIC’s letter holds specific questions the institutes should answer for the agency. Banking and financial law changes with the new crypto-related activity requirements. The new requirements may even cause significant safety, soundness and financial instability. The new crypto-related activity regulations could raise consumer protection concerns, as well.
The FDIC notes that the regulation of crypto-related activities could affect the credit, market, pricing, liquidity and operational risks of cryptocurrency. The FDIC regulations could collectively or individually present soundness and safety concerns in the market. The FDIC agrees with the safety and soundness concerns but worries about terrorist funding and anti-money laundering within the market. The interconnected nature of some crypto-related activities could threaten the financial stability of the market without the new regulations.