The Federal Reserve Board has recently announced the withdrawal of guidance for banks related to their crypto-asset and dollar token activities and related “changes to its expectations for these activities.”
These actions ensure the Board’s expectations remain “aligned with evolving risks and further support innovation in the banking system.”
The Board confirmed that it is rescinding its 2022 supervisory letter establishing “an expectation that state member banks provide advance notification of planned or current crypto-asset activities.”
As a result of this update, the Board said that it will no longer “expect banks to provide notification and will instead monitor banks’ crypto-asset activities through the normal supervisory process.”
Notably, the Board is also rescinding its 2023 supervisory letter “regarding the supervisory nonobjection process for state member bank engagement in dollar token activities.”
Finally, the Board, together with the Federal Deposit Insurance Corporation is joining the Office of the Comptroller of the Currency in “withdrawing from two 2023 statements jointly issued by the federal bank regulatory agencies regarding banks’ crypto-asset activities and exposures.”
The Board will reportedly work with the agencies to consider “whether additional guidance to support innovation, including crypto-asset activities, is appropriate.”
As reported last month, The Office of the Comptroller of the Currency (OCC) announced that it will no longer examine its regulated institutions for “reputation risk” and is removing references to reputation risk from its Comptroller’s Handbook booklets and guidance issuances.
These actions reportedly aim to support the OCC’s mission and its supervisory objectives to ensure that banking institutions have “appropriate and strong risk management processes for their business activities, treat customers fairly, and comply with applicable laws and regulations.”
Acting Comptroller of the Currency Rodney E. Hood said:
“The OCC’s examination process has always been rooted in ensuring appropriate risk management processes for bank activities, not casting judgment on how a particular activity may fare with public opinion. The OCC has never used reputation risk as a catch-all justification for supervisory action. Focusing future examination activities on more transparent risk areas improves public confidence in the OCC’s supervisory process and makes clear that the OCC has not and does not make business decisions for banks.”
As clarified in the update, the removal of references to reputation risk from OCC handbooks and guidance issuances does “not alter the OCC’s expectation that banks remain diligent and adhere to prudent risk management practices across all other risk areas.”