A group of banking regulators in the United States is collaborating on how banks can be permitted to offer crypto services and hold cryptocurrencies on their balance sheets. “If we don’t bring this activity inside the banks, it will develop outside of the banks,” said the chairman of the Federal Deposit Insurance Corporation (FDIC). It will be impossible for federal regulators to regulate.”
Banks in the United States will be subject to clear rules governing their dealings with cryptocurrency, according to US regulators.
The chairman of the Federal Deposit Insurance Corporation (FDIC), Jelena McWilliams, told Reuters in an interview at a fintech conference on Monday that a group of U.S. bank regulators is working on developing a roadmap for banks to engage with crypto assets.
The FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency make up the team (OCC). In May, Federal Reserve Vice Chair of Supervision Randal Quarles announced the collaboration of the three U.S. regulators.
On a conference panel, McWilliams stated:
My goal in this interagency group is to essentially provide a path for banks to be able to act as custodians of these assets, to use crypto assets, digital assets as some form of collateral… At some point, we’ll discuss how and under what conditions banks can keep them on their balance sheets.
While it is simple to establish clear rules for banks to provide custody services, the FDIC chief explained that it is difficult to figure out how to allow a volatile asset to be used as collateral while also including it on bank balance sheets.
“Valuation of these assets and the fluctuation in their value that can be almost on a daily basis,” she was quoted as saying. You must decide how to treat such balance-sheet holdings in terms of capital and liquidity.”
Under the leadership of Brian Brooks, the OCC clarified in June 2020 that national banks and federal savings associations can provide customers with cryptocurrency custody services. Brooks, on the other hand, has resigned, and the new Acting Comptroller of the Currency, Michael Hsu, has asked for a review of the OCC’s cryptocurrency standards before taking office.
“I believe that we need to allow banks to operate in this space while appropriately managing and mitigating risk,” McWilliams said, adding:
If we do not bring this activity inside the banks, it will develop outside of them… It will be impossible for federal regulators to regulate.