Engagement in crypto assets by banks – or the intention to engage in those digital assets – will now trigger a notification to the federal insurer of bank deposits, the agency said Thursday in a letter to all insured institutions.
The Federal Deposit Insurance Corp. (FDIC) said banks and all other institutions whose deposits it insures are asked to provide information described in the letter (FIL-16-2022). The agency said it would review the information and provide supervisory feedback to each institution.
The agency asserted that there is “little consistency” in the definitions associated with many crypto assets and crypto-related activities. The FDIC said that – along with rapid changes and expansion of their structure and scope – makes it difficult to “categorically identify” the assets and activities.
“As a result of the dynamic nature of crypto-related activities, it is difficult for institutions, as well as the FDIC, to adequately assess the safety and soundness, financial stability, and consumer protection implications without considering each crypto-related activity on an individual basis,” the agency wrote.
The FDIC said it requests that all institutions it supervises and that are considering engaging in crypto to “provide all necessary information that would allow the FDIC to engage with the institution regarding related risks.” Those that are already engaging in the assets, the agency said, should “promptly notify the FDIC” (as well as their state regulators).
Risks the FDIC said its concerns relate to safety and soundness, financial stability, and consumer protection.
Regarding those institutions already engaging in crypto, the agency instructed banks to “promptly” contact their FDIC regional director. The agency will then, it said, request information to allow it to assess safety and soundness, consumer protection, and financial stability implications of such activities. However, the list of specific information will depend on each institution’s crypto-related activity.
The initial notification to the regional director, the agency said, should describe the activity in detail and provide the institution’s proposed timeline for engaging in the activity.
The FDIC said it will review the notification and information received, seek any additional information as needed, and consider the specific risks. “The FDIC will provide relevant supervisory feedback to the FDIC-supervised institution, as appropriate, in a timely manner,” the agency said.