Regulation

The United States Federal Reserve Board announced Jan. 27 that it was issuing a policy statement on limitations on banks. The policy seeks to create a level playing field and limit regulatory arbitrage for state banks with deposit insurance, state banks without deposit insurance and national banks, which are overseen by the Office of the Comptroller of the Currency (OCC), by allowing them the same scope of permissible activities.

The new policy will limit the activities of state banks by not allowing them to engage in activities not permitted by national banks unless state legislation allows it. In the Federal Register notice, the statement specifically discusses crypto at length. It stated:

“The Board has not identified any authority permitting national banks to hold most crypto-assets […] As principal in any amount, and there is no federal statute or rule expressly permitting state banks to hold crypto-assets as principal. Therefore, the Board would presumptively prohibit state member banks from engaging in such activity under section 9(13) of the [Federal Reserve] Act.”

The notice also said that state banks have proposed issuing “dollar tokens” — that is, stablecoins — and those banks now will be subject to OCC interpretative letters 1174 and 1179, as are national banks. It added:

“The Board generally believes that issuing tokens on open, public, and/or decentralized networks, or similar systems is highly likely to be inconsistent with safe and sound banking practices.”

The statement was issued on the same day that the Fed rejected the application of Wyoming’s Custodia Bank for Federal Reserve System membership.

Related: OCC makes its staff available for fintech-related discussions

The Fed beefed up scrutiny on banks engaging in crypto activities in August 2022, when it issued a letter requiring the banks it oversees to disclose plans that include crypto, with a reminder to ensure adequate risk management. The letter applied retrospectively to banks already active in crypto.

Articles You May Like

Ethereum Exodus: Whales Withdraw $64 Million ETH From Exchanges, Bullish Signal?
Ethereum Bulls Get Aggressive As Traders Set Sights on $4,000 Amid Market Frenzy
Can Ethereum Touch $4,000? Crypto Analyst Says ETH Rally Far From Over
Beware Of Fake News: Ripple Isn’t Sued Again Over XRP Sales
Ripple CTO Set To Unveil 2024 Blockchain Strategy At ETH Denver