The Federal Reserve has rescinded its guidance for banks related to handling cryptocurrencies and digital assets.
In a recent press release, the Federal Reserve Board said it was removing guidance that forced banks to seek special permission before dealing with digital assets.
According to the release, a 2022 supervisory letter established an expectation that banks would provide advance notification of planned cryptocurrency activities, while updating the Reserve of ongoing ventures.
The justification for the requirements included market instability, money-laundering concerns, and consumer protection.
“Certain types of crypto-assets, such as stablecoins, if adopted at large scale, could also pose risks to financial stability,” the expunged letter read.
However, the board now says it will no longer expect banks to provide notification and will instead “monitor banks’ crypto-asset activities through the normal supervisory process,” the press release explained.
The 2023 letter, since withdrawn, required banks to demonstrate, “to the satisfaction of Federal Reserve supervisors,” that the bank had controls in place in order to conduct safe transactions surrounding cryptocurrencies. This was called a “supervisory nonobjection” where banks did not get to engage in an activity and then have it scrutinized, but rather they needed to submit their “proposed activities” to the Federal Reserve in order to move forward.
This was not a form of an approval process either, though, but rather a “nonobjection.”
Taking off more reins
The Federal Reserve board also said it would be working with the Office of the Comptroller of the Currency to determine if additional guidance to support innovation with crypto-asset activities is needed.
According to Crowdfund Insider, the OCC announced in March that it would be making its own changes to its Comptroller’s Handbook booklets and guidance. On change from the federal agency, which works within the Treasury Department, was that it would no longer examine institutions for “reputation risk.”
“The OCC’s examination process has always been rooted in ensuring appropriate risk management processes for bank activities, not casting judgment on how a particular activity may fare with public opinion,” said Acting Comptroller of the Currency Rodney E. Hood.
“The OCC has never used reputation risk as a catch-all justification for supervisory action. Focusing future examination activities on more transparent risk areas improves public confidence in the OCC’s supervisory process and makes clear that the OCC has not and does not make business decisions for banks.”
President Trump recently signed an executive order aimed at establishing a strategic Bitcoin reserve, which at the same time forbids the acquisition of other digital assets except through forfeiture proceedings.
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Return, Bitcoin, Crypto currency, Federal reserve, Trump administration, Banking, Tech
