US FDIC Calls Banks To Notify Their Crypto-Related Activities

Key Insights:

• US bank insurer wants its client banks to report their crypto activities, including transactions and trading.
• The FDIC would provide banks with supervisory feedback upon reviewing.
• The regulator is concerned about crypto risks like safety, financial stability, and consumer protection.

The Federal Deposit Insurance Corporation (FDIC), the US government bank insurer, has asked banks under its supervision to report on crypto activities such as transactions and trading.

Per a letter released by the Corp on Thursday, FDIC-supervised institutions that engage in crypto activities or have plans should provide information on such actions.

“The FDIC will review the information and provide relevant supervisory feedback.”

The affiliated institutions should comply with the FDIC letter, notifying the government body on any crypto-related activities, including Bitcoin transactions and trading, maintaining stablecoin reserves, and issuing crypto and other digital assets.

Significant Risks

The FDIC letter arrives due to rapidly evolving risks in these activities and concerns about whether the crypto space is not well understood, given limited experience in the nascent space.

The release stated,

“Crypto-related activities may pose significant safety and soundness risks, as well as financial stability and consumer protection concerns. Moreover, these risks and concerns are evolving as crypto-related activities are not yet fully understood.”

FDIC regulates a slew of US-based banks, including national banks and financial behemoths such as the Bank of America and Goldman Sachs.

However, the FDIC isn’t the only banking regulator in the US keen on focusing crypto-related activities. Michael Hsu, head of the Office of the Comptroller of the Currency (OCC), recently warned banking entities that trading crypto derivatives could bring more regulatory scrutiny.

In February, the insurance corporation said that the federal banking agencies need to carefully consider risks posed by crypto products and “determine the extent to which banking organizations can safely engage in crypto-asset-related activities.”

Yellen’s Call for Digital Asset ‘Oversight’

The FDIC letter shortly follows Yellen’s remarks on how regulatory frameworks would need to reflect the risks of crypto activities appropriately.

Treasury Secretary Janet Yellen said during a Thursday speech that crypto regulations must keep pace with innovation to ensure that financial stability and consumer protections are in place.

She said at American University in Washington, DC,

“Our regulatory frameworks should be designed to support responsible innovation while managing risks—especially those that could disrupt the financial system and economy.”

Yellen emphasized the need for a regulatory framework that is “tech neutral” – based on risks and assets rather than technologies.