US banking agencies provided more insight into their plans for regulating cryptocurrencies on Tuesday, issuing a to-do list of their priorities for next year and announcing a new policy that would require banks to seek permission before offering digital currency products.
The Federal Reserve and other banking agencies released an agenda outlining areas of focus, including how they plan to weigh custody, crypto-backed loans and the possibility of capital standards, according to a joint statement. Separately, the Office of the Comptroller of the Currency said that banks must get an additional sign-off from the regulator before engaging with digital coins.
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“Throughout 2022, the agencies plan to provide greater clarity on whether certain activities related to crypto-assets conducted by banking organisations are legally permissible,” the Fed, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. said in the statement.
While the agenda doesn’t affect any current regulations, the topics officials said they want to clarify next year could shape how the agencies ultimately regulate the way banks use crypto. Their “crypto-asset road map” overlaps with moves the OCC made in 2020 to open up banking to digital coins when Brian Brooks was in charge of the agency, though current Acting Comptroller Michael Hsu paused those efforts.
After concluding what they called a “crypto sprint” to study how agencies were approaching crypto, the banking regulators settled on several areas they need to clarify. Those issues include how banks should properly maintain custody of crypto assets, what firms should do to help consumers make transactions, how stablecoins should be issued and what capital and liquidity standards should be for lenders’ crypto holdings.
The OCC followed the release of the road map with a new policy on how banks should interpret its previous crypto directives. Hsu’s agency instructed the banks it regulates to seek pre-approval before they can manage custody of digital coins, hold deposited dollars to back stablecoins and handle crypto transactions tied to a distributed ledger, which is the technology underpinning the industry. Lenders will have to ask for special permission and demonstrate they have sufficient risk controls before the OCC will sign off, according to the agency.
Following their 2022 road map and other recent recommendations, the OCC and other agencies could soon be weighing new rules for regulating tokens more like bank assets. The President’s Working Group on Financial Markets wants Congress to take up legislation requiring that stablecoins only be issued by regulated banks. The group of agency heads has also called for government overseers to assess whether tokens pose risks to the wider financial system.
Still, it’s uncertain whether the three bank agencies will be able to agree on anything in the near term. The OCC is still awaiting the confirmation of a permanent leader, and the Biden administration hasn’t yet nominated a vice chairman to run the Fed’s supervision work. Meanwhile, the FDIC is still run by a Trump administration appointee, Jelena McWilliams.
© 2021 Bloomberg
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