The Federal Reserve Board (the “FRB”) issued Supervision and Regulation Letter 22-6 (“SR 22-6”), offering steerage for FRB-supervised banking organizations (referred to collectively herein as “FRB banks”) in search of to have interaction in actions associated to cryptocurrency and different digital belongings. The letter states that previous to participating in crypto-asset-related actions, such FRB banks should make sure that their actions are “legally permissible” and decide whether or not any regulatory filings are required. SR 22-6 additional states that FRB banks ought to notify the FRB previous to participating in crypto-asset-related actions. Any FRB financial institution that’s already engaged in crypto-asset-related actions ought to notify the FRB promptly concerning the engagement in such actions, if it has not already completed so. The FRB additionally encourages state member banks to contact state regulators earlier than participating in any crypto-asset-related exercise.
These necessities ship a transparent message to FRB banks and in reality to all banks that their crypto-asset associated actions are thought of to be dangerous and to not be entered into flippantly.
Certainly, the FRB famous that crypto-asset-related actions might pose dangers associated to security and soundness, shopper safety, and monetary stability, and thus a FRB financial institution ought to have in place enough methods, threat administration, and controls to conduct such actions in a secure and sound method and per all relevant legal guidelines.
SR 22-6 is just like steerage beforehand issued by the OCC and FDIC; in all instances, the businesses require banks to inform regulators earlier than participating in any sort of digital asset exercise, together with custody actions. The three businesses additionally launched a joint statement final November during which they pledged to supply better steerage on the difficulty in 2022. Additional, in an August 17, 2022 speech, FRB Governor Bowman acknowledged that the FRB employees is working to articulate supervisory expectations for banks on quite a lot of digital asset-related actions, together with:
custody of crypto-assets
facilitation of buyer purchases and gross sales of crypto-assets
loans collateralized by crypto-assets, and
issuance and distribution of stablecoins by banking organizations
Curiously, SR 22-6 comes a couple of days after a bunch of Democratic senators despatched a letter to the OCC requesting that the OCC withdraw its interpretive letters allowing nationwide banks to have interaction in cryptocurrency actions and a day after Senator Toomey despatched a letter to the FDIC questioning whether or not it’s deterring banks from providing cryptocurrency providers.
Though previous steerage already required banks to inform regulators of crypto exercise, this steerage doubtless might discourage further banks from getting into into crypto-related actions sooner or later or from including further crypto providers. Ultimately, it might have the unlucky impact of constructing it harder for cryptocurrency corporations to acquire banking providers.
Copyright 2022 Ok & L GatesNationwide Legislation Evaluation, Quantity XII, Quantity 230