The Federal Deposit Insurance Corporation (F.D.I.C.) has requested that all banks engaging in cryptocurrency-related activities notify the agency of those activities. The request came in the form of an April 7, 2022 letter, FIL-16-2022, to F.D.I.C.-supervised banks. In that letter, the F.D.I.C. summarizes its concerns regarding banks’ participation in cryptocurrency-related activities. Those concerns include the potentials for consumer confusion, risks to banks’ information technology and cybersecurity systems and money laundering. The F.D.I.C. also wrote that certain inherent characteristics of cryptocurrencies, including practical challenges with identifying digital assets’ ownership, raise unique questions about banks’ ability to ensure safety and soundness.
In light of these concerns, the April 7 letter asks banks to notify the F.D.I.C. before engaging in any cryptocurrency-related activities, and “promptly” to inform the agency if those banks have already begun doing so. The agency may then request further information and provide regulatory guidance to those banks. The F.D.I.C. also recommends that banks simultaneously notify their state regulators of the same activities.
FIL-16-2022 expressly takes no position on whether any cryptocurrency-related activities are permissible. Instead, the letter is an information-gathering exercise. It follows President Biden’s March 9, 2022 Executive Order on Ensuring Responsible Development of Digital Assets, which named the F.D.I.C. as one of many federal agencies that would take part in a new coordinated regulatory framework. It also comes less than a year after the F.D.I.C. invited banks on a voluntary basis to comment on their digital-asset activities.
The F.D.I.C.’s interest in cryptocurrencies proceeds in parallel with developments at other federal regulators. The Office of the Comptroller of the Currency (OCC) has established through several publications, most recently 2021’s Interpretive Letter 1179, a path forward for banks wishing to offer cryptocurrency services. National banks and federal savings associations may provide cryptocurrency services if they can demonstrate to the OCC that they have adequate controls in place. Banks therefore may notify the OCC of intended cryptocurrency activities, and then should not proceed with them until receiving a non-objection letter from the agency. Other federal office and agencies, including the Securities Exchange Commission, Internal Revenue Service, Department of Justice, Commodity Futures Trading Commission and Department of the Treasury, have all adopted rules or published guidance in recent years relating to cryptocurrencies as well.
Banks today are showing more and more interest in offering cryptocurrency-related services. Those services could include custodial wallets (holding encryption “keys” that customers can use with their third-party digital accounts). State Street Bank, for example, the world’s largest custodial bank, recently announced it will offer custodial services for cryptocurrency assets. Banks can also offer payment processing, lending, broker-dealer exchange services and more that involve cryptocurrencies. The American Bankers Association in 2021 encouraged banks to explore the potential benefits of offering cryptocurrency services. And MasterCard and Visa recently announced new services to help their member banks offer these services.
In recent years, federal agencies with jurisdiction over cryptocurrency assets have not always been in harmony with each other. The regulatory framework continues to evolve.
Perkins Thompson, P.A.’s Banking and Financial Services practice counsels national and state banks, credit unions and other financial institutions. The firm’s Intellectual Property & Technology attorneys advice financial institutions, individuals and tech-sector companies on cryptocurrency, blockchain and digital asset matters.
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