An interagency team of U.S. banking regulators is sitting down to create a regulatory roadmap for banks. This will give banks legal certainty to include cryptocurrencies and stablecoins in their service offerings.
The Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Bank, and the Office of the Comptroller of the Currency (OCC) want to create clear crypto regulations for banks. This includes some coordination among the three U.S. banking regulators. This is intended to give banks legal certainty to facilitate trading for their customers. The regulations should also cover the use of digital assets as collateral for loans and the holding of cryptocurrencies on the balance sheet of banks.
The FDIC acknowledged in May 2021 that there are novel and unique considerations related to digital assets. The agency began collecting comments and information from interested parties to better understand industry and consumer interests. This comes after banks showed some early demand and participation in the digital asset ecosystem.
FDIC Chair Jelena McWilliams said in a 2019 interview that the entire central banking system could be disrupted by cryptocurrencies. She expressed a desire to find a compromise between the two extremes: Neither did she want to greenlight something she didn't really know yet, nor did she want to discourage the industry from possible innovation.
Complications with crypto deposits
When a bank fails in the U.S., the FDIC is responsible for liquidating bank loans and other assets. The regulator recently partnered with crypto custodian Anchorage to help it liquidate a bank's crypto assets. That way, bitcoin and other digital assets can be stored and sold if a bank fails.
"I think we need to support banks in this area, but at the same time manage and limit the risks appropriately. If we don't bring this segment into the banking world, it will develop outside and federal regulators won't be able to regulate it. My goal in this interagency group is to find a way to allow banks to act as custodians of these assets and use crypto assets as a form of collateral." - FDIC Chair Jelena McWilliams
However, the volatility of cryptocurrencies makes it difficult to determine how to use them as collateral and include them on bank balance sheets. Risk management and mitigation are key if banks want to get involved in this space, according to McWilliams. Some banks, such as JP Morgan and Goldman Sachs, have already begun dabbling amid regulatory ambiguity.