U.S. Federal Banking Regulators Announce Plan for Crypto-Asset Policy Initiative
The interagency "policy sprints" are designed to give banks guidance on how to navigate crypto-assets moving forward.
On November 23, 2021, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency issued a joint statement concerning the interagency crypto "policy sprints" that were first announced in May 2021. The stated purpose of the "policy sprints" is to develop and provide clarity on how banks can engage with crypto-assets.
The statement noted that through these "sprints," agency staff with relevant subject matter expertise conducted preliminary analysis on certain issues:
- Developing a common vocabulary for the use of crypto-assets by banking organizations;
- Identifying and assessing risks in safety and soundness, consumer protections, compliance, and legal permissibility of potential crypto-asset activities; and
- Analyzing application of existing regulations and guidelines and identifying areas where additional clarification is necessary.
Based on their analysis, the agencies developed a regulatory roadmap for navigating activities involving crypto-assets, about which they intend to provide further information throughout 2022. The purpose of the roadmap is to provide clarity and guidance on the legality, expectations for safety, consumer protection, and compliance with regulations required for banking activities related to crypto-assets. The statement identified particular areas the agencies expect to provide guidance:
- Crypto-asset safekeeping and traditional custody services;
- Ancillary custody services;
- Facilitation of customer purchases and sales of crypto-assets;
- Loans collateralized by crypto-assets;
- Issuance and distribution of stablecoins, i.e., digital assets that are designed to maintain a stable value relative to a national currency or other reference assets;
- Activities involving the holding of crypto-assets on balance sheet; and
- Application of bank capital and liquidity standards to crypto-assets.
The statement does not indicate whether the "policy sprint" teams have completed preliminary analysis concerning any of the identified topics. Nor does the statement provide specific dates in 2022 by when the agencies expect to issue guidance. The statement follows recent remarks by Acting Comptroller Michael Hsu at the American Fintech Council's Fintech Policy Summit 2021 concerning the regulatory framework for fintechs. The Acting Comptroller referenced the "policy sprints" as part of a broader set of forthcoming pronouncements—also to include chartering decisions and interpretive letters—concerning the "regulatory perimeter" for fintech.
The next steps stemming from the sprint will lay the foundation for how traditional and new finance interact. It remains unclear whether regulators, in allowing traditional finance to adapt to fintech, will impede development of fintech that goes beyond—and ultimately may supplant—core elements of traditional finance. In this sense, the policy statement marks "the end of the beginning" in what will be a pivotal time for crypto-assets and broader fintech.
