by • The United States Federal Reserve Board issued a policy statement that states both insured and uninsured banks will be subjected to limits on certain activities, including crypto assets.
• The policy statement seeks to promote a level playing field and limit regulatory arbitrage by imposing limits on the activities of financial institutions.
• The policy statement does not preclude state member banks or prospective applicants from providing crypto-assets safekeeping services.
The United States Federal Reserve Board has issued a policy statement that affects the activities of both insured and uninsured banks under its jurisdiction. The statement, which becomes effective upon publication in the Federal Register, makes it clear that financial institutions will be subjected to the same limitations on activities, including those related to crypto assets. This action is taken in an effort to promote a level playing field and limit regulatory arbitrage.
The policy statement states that banks should ensure their activities are conducted in a safe and sound manner by having risk management processes in place, as well as internal controls and information systems. The statement also clarifies that state member banks or prospective applicants are not precluded from providing crypto-assets safekeeping services.
The Federal Reserve Board said it had seen an increase in the number of inquiries or proposals from financial institutions that wish to engage in non-traditional activities, including those related to crypto assets. This prompted the board to take action and impose limits on certain activities to ensure the safety and soundness of banking operations.
The Federal Reserve Board’s action is part of a larger effort to protect consumers and promote financial stability. The board also noted that it will continue to closely monitor developments in the industry and will take further action as necessary.
The policy statement comes after the United States Office of the Comptroller of the Currency (OCC) issued a statement in July 2020 that allows national banks and federal savings associations to provide crypto-related services. In the statement, the OCC stated that banks must have an effective risk management program in place before engaging in any crypto-related activities.
Overall, the Federal Reserve Board’s policy statement is an important step towards establishing more stringent regulations for banks that deal with crypto assets. This action is seen as a way to protect consumers and ensure the safety and soundness of banking operations. Furthermore, the statement does not preclude state member banks or prospective applicants from providing crypto-assets safekeeping services.
