Federal Reserve Board Retreats on Crypto Guidance for Banks

The Federal Reserve (Fed) and the Federal Deposit Insurance Corporation (FDIC) recently announced the withdrawal of previously issued guidance concerning banks' involvement with crypto-assets. The American Bankers Association (ABA) applauded the announcement. It withdraws a 2022 supervisory letter that called on state member banks to inform the Fed prior to participating in crypto-asset activities, as well as a 2023 letter concerning state member bank participation in dollar token activities.

In light of these changes the board has agreed to withdraw the 2022 and 2023 supervisory letters. This move is hugely significant regulation change for any bank looking to enter, or already operating in, the digital asset space. The 2022 supervisory letter set an expectation that state member banks notify the FDIC in advance of establishing new crypto-asset activities. The 2023 supervisory letter followed up on previous supervisory guidance related to state member bank engagement in dollar token activities.

Rob Nichols, president and CEO of the ABA, welcomed the announcement, calling it a “win-win-win” for consumers.

Today’s announcement from the Fed and FDIC is a welcome and important step toward achieving that goal and ensuring consumers can access these products and services through their trusted bank relationships. - Rob Nichols, president and CEO of ABA.

Nichols went on to describe more of the ABA’s perspective on regulating digital assets.

We have long believed banking regulators should avoid implementing rules or guidance that limit banks’ ability to offer digital asset products and services in a safe and sound manner. - Rob Nichols, president and CEO of ABA.

These supervisory letters have been rescinded by the regulators. This adjustment marks a departure from the previous hardline stance, allowing banks more latitude and flexibility to pursue the opportunities within the crypto space. This will stimulate innovation and competition in the financial ecosystem while holding banks accountable for the risks they take per usual.