The FDIC talks about the future relationship between banks and cryptocurrency

A group of banking regulators in the United States is collaborating on how banks can be permitted to offer crypto services and hold cryptocurrencies on their balance sheets. According to the chairman of the Federal Deposit Insurance Corporation (FDIC),“If we don’t bring this activity inside the banks, it is going to develop outside of the banks … The federal regulators won’t be able to regulate it.”

The chairman of the Federal Deposit Insurance Corporation (FDIC), Jelena McWilliams, told Reuters in an interview at a fintech conference on Monday that a group of U.S. bank regulators is working on developing a roadmap for banks to engage with crypto assets.

The FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency make up the team (OCC). In May, Federal Reserve Vice Chair of Supervision Randal Quarles announced the collaboration of the three U.S. regulators.

On a conference panel, McWilliams stated:

My goal in this interagency group is to basically provide a path for banks to be able to act as a custodian of these assets, use crypto assets, digital assets as some form of collateral … At some point in time, we’re going to tackle how and under what circumstances banks can hold them on their balance sheet.

While it is simple to establish clear rules for banks to provide custody services, the FDIC chief explained that it is difficult to figure out how to allow a volatile asset to be used as collateral while also including it on bank balance sheets.

Under the leadership of Brian Brooks, the OCC clarified in June 2020 that national banks and federal savings associations can provide customers with cryptocurrency custody services. Brooks, on the other hand, has resigned, and the new Acting Comptroller of the Currency, Michael Hsu, has asked for a review of the OCC’s cryptocurrency standards before taking office.

“I think that we need to allow banks in this space, while appropriately managing and mitigating risk,” McWilliams opined, elaborating:

If we don’t bring this activity inside the banks, it is going to develop outside of the banks … The federal regulators won’t be able to regulate it.

Patrick

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