The Federal Reserve issued a press release designed to provide specific guidance and information to banks engaged in, or considering engaging in, crypto-related activities.
This new guidance is an update to a joint statement issued by the Fed, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., which established the “roadmap” of future policy work related to crypto assets.
“The emerging crypto-asset sector presents potential opportunities to banking organizations, their customers and the overall financial system; however, crypto-asset-related activities may pose risks related to safety and soundness, consumer protection and financial stability…” the guidance read.
The new guidance letter is meant to be applied to all banking organizations supervised by the Fed and established new notice criteria for those banks intending to, or are currently, engaging in crypto-related activities.
The Fed’s guidance states that a supervised bank should notify its lead supervisory point of contact at the Fed prior to engaging in any crypto-asset-related activity; and any supervised bank that is already engaged in crypto-asset-related activities should notify its lead supervisory point of contact at the Fed promptly regarding such activities, if it has not already done so.
Following notification, Fed supervisory staff will provide relevant supervisory feedback, as appropriate, in a timely manner.
The new guidance also established security and risk management expectations for banks engaging in crypto-related activities.
“In all cases, a supervised banking organization should, prior to engaging in these activities, have in place adequate systems, risk management, and controls to conduct crypto-asset-related activities in a safe and sound manner and consistent with applicable laws, including applicable consumer protection statutes and regulations,” the central bank’s new guidance read. “This includes having adequate systems in place to identify, measure, monitor, and control the risks associated with such activities on an ongoing basis. These systems should cover operational risk, financial risk, legal risk, compliance risk, and any other risk necessary to ensure the activities are conducted in a manner that is consistent with safe and sound banking and in compliance with applicable laws, including applicable consumer protection statutes and regulations.”
The Fed also encourages state-member banks to notify their state regulators prior to engaging in crypto-related activity.