The legal frameworks applicable to national banks, insured state banks, and uninsured state banks can result in differences in the scope of allowed activities depending on the type of entity, according to the US Federal Reserve. Regardless of this discrepancy, the Fed will be certain to apply the “same limitations on activities, including novel banking activities, such as crypto-asset-related activities.”
The Federal Reserve appears to be tightening its oversight of banks that choose to engage in digital asset activity.
The vote on the policy statement was unanimous.
The announcement by the Fed came on the same day that it denied digital asset firm Custodia Bank, Inc., of Cheyenne, Wyoming, to become a member of the Federal Reserve System. Custodia is a special purpose depository institution chartered by the state of Wyoming.
The Fed said it was making the statement to address the need to create a “level playing field” and mitigate “regulatory arbitrage.”
In a cautionary statement that probably points at entities that engage in crypto, the Fed said activities must be allowed under the law, and banks need to have controls and risk management processes to appropriately manage these activities.
The Fed said that it has received a number of proposals and inquiries from banks in recent years of engaging in “novel and unprecedented activities,” including crypto. It said it would evaluate such requests “consistent with longstanding practices.”
“Today’s action would not prohibit a state member bank, or prospective applicant, from providing safekeeping services, in a custodial capacity, for crypto-assets if conducted in a safe and sound manner and in compliance with consumer, anti-money laundering, and anti-terrorist financing laws.”
The Fed has the authority to limit the activities of any state bank, and it is prepared to do so.
The policy statement mentions stablecoins adding that state member banks must “receive a supervisory nonobjection from Federal Reserve supervisors before commencing such activity, in line with the condition that the OCC has placed on national banks.”
The policy statement becomes effective as soon as it is published in the Federal Register.