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The Federal Reserve Board (the “FRB”) issued Supervision and Regulation Letter 22-6 (“SR 22-6”), offering steerage for FRB-supervised banking organizations (referred to collectively herein as “FRB banks”) looking for to interact in actions associated to cryptocurrency and different digital property. The letter states that previous to participating in crypto-asset-related actions, such FRB banks should be sure that their actions are “legally permissible” and decide whether or not any regulatory filings are required. SR 22-6 additional states that FRB banks ought to notify the FRB previous to participating in crypto-asset-related actions. Any FRB financial institution that’s already engaged in crypto-asset-related actions ought to notify the FRB promptly relating to the engagement in such actions, if it has not already performed so. The FRB additionally encourages state member banks to contact state regulators earlier than participating in any crypto-asset-related exercise.
These necessities ship a transparent message to FRB banks and in reality to all banks that their crypto-asset associated actions are thought-about to be dangerous and to not be entered into evenly.
Certainly, the FRB famous that crypto-asset-related actions could pose dangers associated to security and soundness, client safety, and monetary stability, and thus a FRB financial institution ought to have in place enough techniques, threat administration, and controls to conduct such actions in a secure and sound method and in keeping with all relevant legal guidelines.
SR 22-6 is much like steerage beforehand issued by the OCC and FDIC; in all circumstances, the companies require banks to inform regulators earlier than participating in any form of digital asset exercise, together with custody actions. The three companies additionally launched a joint statement final November by which they pledged to supply larger steerage on the problem in 2022. Additional, in an August 17, 2022 speech, FRB Governor Bowman said that the FRB employees is working to articulate supervisory expectations for banks on a wide range of digital asset-related actions, together with:
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custody of crypto-assets
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facilitation of buyer purchases and gross sales of crypto-assets
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loans collateralized by crypto-assets, and
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issuance and distribution of stablecoins by banking organizations
Curiously, SR 22-6 comes a number of days after a gaggle of Democratic senators despatched a letter to the OCC requesting that the OCC withdraw its interpretive letters allowing nationwide banks to interact in cryptocurrency actions and a day after Senator Toomey despatched a letter to the FDIC questioning whether or not it’s deterring banks from providing cryptocurrency providers.
Though previous steerage already required banks to inform regulators of crypto exercise, this steerage possible might discourage extra banks from coming into into crypto-related actions sooner or later or from including extra crypto providers. Ultimately, it might have the unlucky impact of creating it tougher for cryptocurrency corporations to acquire banking providers.
Copyright 2022 Ok & L GatesNationwide Legislation Evaluate, Quantity XII, Quantity 230
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