FDIC rescinds guidance around banks and crypto
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Travis Hill, speaking to the Senate Banking committee in 2022. Photo: Amanda Andrade-Rhoades/Getty Images
The Federal Deposit Insurance Corporation said Friday that banks no longer need to get its prior approval before engaging in crypto-related activities, like holding digital currency assets or partnering with companies in the industry.
Why it matters: After publishing a general caution against banks participating in the industry just two years ago, the FDIC is the latest Trump administration regulator to change its tune entirely amid the president's warm embrace of crypto.
What they're saying: "With today's action, the FDIC is turning the page on the flawed approach of the past three years," FDIC acting chairman Travis Hill said in a statement.
The big picture: The joint warning to banks in January 2023 from the Fed, the FDIC and the Office of the Comptroller of the Currency followed the crash of the terra stablecoin and the fall of FTX.
- In retrospect, the industry has characterized that statement as a coordinated roadblock by regulators, one in which the warning to banks was, in practice, a prohibition.
State of play: The OCC was the first of those regulators to revise their guidance, telling banks it supervises earlier this month that they no longer need permission to engage in certain common cryptocurrency-related activities.
- The Fed as of Friday had not issued any update, though chair Jerome Powell told lawmakers during a congressional hearing last month that the central bank would take a fresh look at the guidance.
The intrigue: A lawsuit initiated by Coinbase, a crypto exchange, ended up getting some of the letters from the FDIC to member banks entered into the public record.
- Some of the activities banks sought to engage in included allowing customers to buy and hold various cryptocurrencies (as Cash App and Venmo do now), offering settlement services between crypto companies, and trading digital assets with the bank's funds.
- Under the prior regime, banks that asked for such permissions never quite seemed to get it.
The bottom line: The new policy clarifies that "FDIC-supervised institutions may engage in permissible activities, including ... digital assets, provided that they adequately manage the associated risks."
Editor's Note: This story has been updated with additional details thoughout.
