The U.S. Federal Deposit Insurance Corporation (FDIC) has revoked its earlier order that required banks to obtain approval prior to engaging with cryptocurrency
The U.S. Federal Deposit Insurance Corporation (FDIC) has canceled its earlier order that required banks to obtain the agency's approval. The new policy, announced on March 28, marks a significant shift from previous stances and may spur more banks to integrate cryptocurrency services without delay or denial.
Announcing the cancellation of FIL-16-2022, (2022 Regulation) that mandated that banks first seek permission from the FDIC to engage in cryptocurrency-related activity, the ruling allows banks supervised by the FDIC to offer cryptocurrency services without seeking the FDIC approval provided that there is effective risk management.
The regulation reads, "This FIL affirms that 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. The FDIC expects that FDIC-supervised institutions will conduct all activities in a safe and sound manner and in accordance with all applicable laws and regulations."
The FDIC’s acting chairman, Travel Hill is quoted saying that, "With today's action, the FDIC is turning the page on the flawed approach of the past 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."
This new guidance came shortly after President Donal Trump came out with a much awaited federal order that instructed strengthening America’s foothold in digital assets and making friendly friendly policies to establish digital asset stockpiles. The purpose of the policy according to the executive order is “to support the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy.”
Greater Regulatory Clarity Encourages Banking Participation
With fewer regulations in the way, banks can now be more inclined to provide crypto services such as stablecoin payments, blockchain transactions, and safe crypto storage. Previously, most large banks avoided crypto because the regulations were not clear. But with the new move by the FDIC, they now feel confident to venture into digital assets. Many experts believe that more transparent regulations will prompt more banks to provide crypto services. This would introduce a much greater amount of money into the digital asset economy.
In a statement praising the move, the President and CEO of American Bankers Association, Rob Nixon said: "We welcome FDIC’s new guidance allowing supervised institutions to engage in permissible crypto-related activities without receiving prior FDIC approval. This important step removes an obstacle that led banks to engage more cautiously in the digital asset market, which has prevented customers from obtaining innovative products and services through their trusted bank relationships. America’s banks are actively evaluating ways to compete safely and responsibly across the financial services ecosystem, and this type of regulatory clarity is critical to enhancing innovation in the space. We look forward to our continued collaboration with the FDIC and the other banking agencies as they work to issue further guidance in this rapidly developing marketplace."
This move by the FDIC indicates that the government is warming up to new concepts in digital finance. Now that there are fewer barriers in front of them, banks can now venture into crypto services, and these may open up more choices and advantages to the common consumer. Banks, however, must still exercise caution and mitigate risks while venturing into new ground. In short, although this is a thrilling move forward, we all must keep a close eye as digital banking continues to grow.
