The FDIC has issued a new policy allowing banks to engage in crypto activities without pre-approvals, effective ending a standard that had severed institutions from the digital assets sector.
FDIC Reverses U.S. Crypto Banking Policy, Allowing Banks to Engage in Crypto Activities Without Pre-Approvals
The ‘Federal Deposit Insurance Corp’ (FDIC) has issued a new policy that scraps previous guidance calling for banks to get the regulator’s sign-off before engaging in any new crypto activity. This move comes closely on the heels of a similar decision from the Office of the Comptroller of the Currency (OCC).
The Federal Deposit Insurance Corporation (FDIC) is a US government agency that provides deposit insurance to protect deposits in banks.
Established in 1933, the FDIC insures deposits up to $250,000 per depositor, per insured bank.
This protection applies to checking and savings accounts, money market deposits, and certificates of deposit.
The FDIC also supervises and regulates banks to ensure their safety and soundness.
New Guidance for Banks
The FDIC will no longer instruct banks to seek prior approval before they engage in crypto activities, effectively ending a standard that had severed institutions from the digital assets sector. This change is part of a broader effort by regulators to reverse years of crypto hesitancy in the US government.
Crypto regulation has become a pressing concern for governments worldwide.
In 2017, Japan became the first country to recognize Bitcoin as a legal payment method.
The European Union introduced the Fifth Anti-Money Laundering Directive in 2020, requiring crypto exchanges to register with national authorities.
In the US, the Securities and Exchange Commission (SEC) has been actively regulating Initial Coin Offerings (ICOs).
As of 2022, over 100 countries have implemented some form of crypto regulation.
Courtroom Fight with Coinbase Unveiled Flawed Approach
A recent courtroom fight between the FDIC and crypto exchange Coinbase had revealed dozens of letters between the regulator and banks it supervised, highlighting the flawed approach taken by the agency. The correspondence showed that the ‘FDIC had instructed banks to steer clear of new crypto matters while it hashed out policies, but never developed any, leaving bankers hanging’.
The Federal Deposit Insurance Corporation (FDIC) is a US government agency that provides deposit insurance to protect bank deposits up to $250,000.
Coinbase, on the other hand, is a digital currency exchange platform that allows users to buy, sell, and store cryptocurrencies like Bitcoin.
Unlike FDIC-insured banks, Coinbase does not offer deposit insurance for cryptocurrency holdings.
According to a survey, 71% of investors use Coinbase for cryptocurrency trading.
The FDIC insures over $13 trillion in deposits, while Coinbase's annual revenue reached $7.6 billion in 2020.
New Industry Guidance
The new industry guidance issued on Friday comes after President Donald Trump elevated a crypto-friendly leadership at the FDIC and other financial regulators, directing his administration to open doors for the industry. According to FDIC Acting Chairman Travis Hill, ‘With today’s action, the FDIC is turning the page on the flawed approach of the past three years’.
Banks Can Forge Ahead
Banks that were once expected to get pre-approvals on crypto matters can now move forward as long as they are appropriately considering the risks. The guidance emphasizes safety and soundness standards.
White House Official Cheers the Move
Bo Hines, the White House’s director of its council of digital assets advisers, praised the FDIC‘s decision in a social media post, calling it a ‘huge step forward’
