FDIC Drops 2022 Rule That Forced Banks to Get Prior Approval Before Engaging in Crypto Activities

This move opens the door for financial institutions to explore the digital asset space without waiting for approvals that never arrived.

The Federal Deposit Insurance Corp (FDIC) is dropping its 2022 rule that forced banks to get prior approval before engaging in crypto activities, according to a report by The Block.

The move will allow financial institutions to explore the digital asset space without waiting for approvals that never arrived.

The FDIC’s new guidance confirms that the “FDIC-supervised institutions may engage in permissible activities, including activities involving new and emerging technologies such as crypto-assets and digital assets, provided that they adequately manage the associated risks.”

Further, as with all other activities, the institutions should consider the associated risks, consumer protection requirements; and anti-money laundering requirements and consult with their supervisors when needed.

FDIC Shifts Stance After Legal Battle with Coinbase

The FDIC, which oversees many small banks and protects the banking system, played a big role in the crypto debanking issue. A lawsuit with Coinbase showed the FDIC told banks to avoid crypto deals while creating new rules, but never actually set any.

This new move comes after President Trump appointed crypto-friendly leaders and urged his administration to support the industry.

According to Acting Chairman Travis Hill, the new guidance marks a shift away from the previous, ‘flawed approach’ which the FDIC had taken over the last three years.

“I expect this to be one of several steps the FDIC will take to lay out a new approach for how banks can engage in crypto- and blockchain-related activities in accordance with safety and soundness standards,” he noted.

Bo Hines, head of the White House’s digital assets advisory council, praised the the move as a “huge step forward” in a social media post.

Previously, the FDIC, Federal Reserve, and OCC all required banks to get pre-approval before engaging in crypto activities.

The Office of the Comptroller of the Currency (OCC) recently reversed its 2022 guidance, which had been issued during a time when the digital asset industry was facing significant issues like failures of major companies and high-profile fraud cases, including the downfall of the global crypto exchange FTX. This move signals a shift in how regulators view the digital assets sector.