US Regulator Requests Banks Report Crypto Activity

The U.S. Federal Deposit Insurance Corporation (FDIC) has requested that banks under its jurisdiction notify it of any crypto-related activities they are engaged in or intend to be engaged in. 

In a letter published on its website, the federal regulator asked that banks provide any information, “that will allow the agency to assess the safety and soundness, consumer protection, and financial stability implications of such activities.” 

In addition to providing details on the planned activity, the FDIC also requested a proposed timeline for such activities. The FDIC said it would review the information upon receiving it and provide appropriate supervisory feedback.

In the letter, the FDIC claimed to be supportive of innovations, conditional on their safety, compliance with regulations, and fairness to consumers. 

However, the regulator expressed concern over crypto assets, as there has been limited experience with them, given the speed at which they have developed, to comprehensively understand their risks.

Accordingly, the FDIC said that “insured depository institutions face risks in effectively managing the application of consumer protection laws and regulations to new and changing crypto-related activities.” 

Additionally, it believes that crypto-related activities also present significant safety risks to consumers and could ultimately threaten financial stability. 

The FDIC warned that confusion surrounding crypto-assets on the part of consumers could lead to disruptions, such as a “run” on a firm’s financial assets.

Crypto risk a priority

In Feb, the FDIC listed evaluating crypto-asset risks as one of its top priorities for the year. 

In its evaluation, the regulator had earlier stated that the rapid integration of digital assets into the financial system as it currently exists could pose significant risks to its fundamental security. It added that banks should carefully consider the risks posed by these products before engaging in crypto-asset-related activities.  

“To the extent such activities can be conducted in a safe and sound manner, the agencies will need to provide robust guidance to the banking industry on the management of prudential and consumer protection risks raised by crypto-asset activities,” the statement read.