Fed policy to align bank oversight could limit crypto activities by state banks

The US Federal Reserve announced on January 27 that it will issue a policy statement on restrictions on banks. The policy will create a level playing field and enable regulatory arbitrage for state-owned banks with deposit insurance, state-owned banks without deposit insurance, and state-owned banks supervised by the Office of the Comptroller of the Currency (OCC). Aim to limit. scope of activities permitted;

The new policy limits the activities of state banks by not permitting them to engage in activities they do not authorize unless state law permits. In a Federal Register notice, the statement specifically elaborates on the crypto. It said:

“Board has not identified powers to allow national banks to hold most crypto assets […] There are no federal laws or regulations that expressly allow state banks to hold crypto assets as principal of any amount. Therefore, the Board will likely prohibit state member banks from engaging in such activities. [Federal Reserve] activity. ”

The notice also states that state-owned banks are proposing to issue “dollar tokens,” or stablecoins, and that these banks are now subject to OCC Interpretive Letters 1174 and 1179, as are national banks. increase. It added:

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

The statement was issued the same day the Fed rejected Wyoming’s custodian bank’s application to join the Federal Reserve.

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Fed to tighten oversight of banks engaged in cryptocurrency-related activities in August 2022, urging them to ensure adequate risk management and requiring supervised banks to disclose plans involving cryptocurrencies I have issued a letter. The letter was applied retroactively to banks already active in cryptocurrencies.