The Federal Reserve, FDIC and OCC (the Agencies) recently issued a statement outlining work they’ve done related to crypto-assets and what they’re planning for the future (i.e., a “crypto-asset roadmap”).
Specifically, the Agencies have begun to look at the different types of crypto-asset activities institutions may get involved with, such as crypto-asset custody; facilitating the purchase and sale of crypto-assets; using crypto-assets as collateral; payment activity; and holding crypto-assets on a balance sheet. Their work up to this point has focused on:
- Developing a common and consistent vocabulary that can be used and understood in the industry;
- Identifying and assessing key safety and soundness, consumer protection, and compliance risks;
- Conducting crypto-asset activities from a legal perspective;
- Applying existing regulations and guidance; and,
- Identifying areas that could use additional clarity.
The Agencies refer to the above as “sprint work”. In 2022, the Agencies plan to clarify permissible crypto-asset activities, as well as safety and soundness, consumer protection and compliance expectations. In addition, the Agencies will watch for new developments and look at how capital and liquidity standards should apply in relation to crypto-assets.
OCC Interpretive Letter
The OCC also issued an Interpretive Letter to clarify previous interpretations on cryptocurrency activity. If done consistently with safe and sound banking practices, prior letters had clarified that banks may:
- …provide certain cryptocurrency custody services…;
- …hold deposits that serve as reserves for stablecoins that are backed on a 1:1 basis by a single fiat currency and held in hosted wallets; and,
- …use distributed ledgers and stablecoins to engage in and facilitate payment activities.
This letter, however, explains how banks can demonstrate activities are being done in a safe and sound manner. Banks should document and be able to demonstrate an understanding of the specific risks (operational, liquidity, strategic, compliance, etc.) and compliance requirements. Before beginning any of these activities, banks should notify their supervisory office in writing and receive written notice of the OCC’s “non-objection”. The OCC does also note the conditions, processes and controls outlined in prior letters still apply.
Diane joined Banker’s Compliance Consulting with over 10 years of compliance experience and over 15 years of experience within the financial industry. Diane is a Certified Regulatory Compliance Manager (CRCM) and has a Bachelor’s Degree in Sociology with a concentration in Criminal Justice. She is a graduate of the Schools of Banking Compliance School and has participated in various other training opportunities throughout her career. Diane understands firsthand the struggles banks face in building and maintaining successful compliance programs. Her experience and common sense approach to consumer compliance is a great asset to our clients.
Diane and her husband have two kids who keep them busy. She enjoys running and other sports and is a big Bugs Bunny fan! She’s a bit crazy in that she does enjoy reading some of these regulations and she’s a “crazy cat lady!” Her cat tales are hilarious!