The US Federal Reserve Board announced on January 27 the publication of a policy statement on limitations on banks. The policy is intended to level the playing field and limit regulatory arbitrage for state banks with deposit insurance, state banks without deposit insurance, and national banks, which are supervised by the Office of the Comptroller of the Currency (OCC), allowing them to same scope of permitted activities.
The new policy will limit the activities of state banks by not allowing them to carry out activities not allowed by national banks, unless state law allows it. In the Federal Register notice, the statement specifically talks about cryptocurrencies in detail. Declares:
“The Council has not identified any authority that allows national banks to hold most crypto assets […] as principal in any amount, and there is no federal statute or regulation that expressly allows state banks to hold crypto-assets as principal. Therefore, the Board would presumably prohibit member state banks from engaging in such activity under section 9(13) of the Act. [de la Reserva Federal]”.
The notification also said that state-owned banks have proposed to issue “dollar tokens”—that is, stablecoins—and those banks will now be subject to OCC letters of interpretation 1174 and 1179, just like national banks. And added:
“The Board generally believes that the issuance of tokens on open, public and/or decentralized networks, or similar systems is highly likely to be inconsistent with safe and sound banking practices.”
The statement was issued the same day the Fed rejected Custodia Bank of Wyoming’s application to become a member of the Federal Reserve System.
The Fed stepped up scrutiny on banks engaging in crypto activity in August 2022, when it issued a letter requiring banks it oversees to disclose plans that include cryptocurrency, with a reminder to ensure proper risk management. The letter applied retroactively to banks already active in the cryptocurrency space.
@federalreserve issues policy statement to promote a level playing field for all banks with a federal supervisor, regardless of deposit insurance status: https://t.co/ms40zhoYUY
—Federal Reserve (@federalreserve) January 27, 2023
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