US Banking Regulator FDIC Preparing Landscape For Banks And Crypto

US Banking Regulator FDIC Preparing Landscape For Banks And Crypto

banks and crypto

Image: Jernej Furman / Flickr / CC https://www.flickr.com/photos/91261194@N06/ https://creativecommons.org/licenses/by/2.0/

A team of U.S. bank regulators is trying to provide a roadmap for banks and their clients looking to hold cryptocurrencies in an effort to control the fast-developing assets, a top U.S. bank regulator told Reuters Monday on the sidelines of a fintech conference in Las Vegas.

The head of the U.S. Federal Deposit Insurance Corporation (FDIC), Jelena McWilliams said that the agency is focused on creating “clear guidance” on the intersection between crypto and U.S. banking and plans to issue “a series of policy statements in the coming months.”

“I think that we need to allow banks in this space, while appropriately managing and mitigating risk,” McWilliams told Reuters. “If we don’t bring this activity inside the banks, it is going to develop outside of the banks. … The federal regulators won’t be able to regulate it.”

Speaking at the Money 20/20 conference in Las Vegas, McWilliams described her job this way: “To provide clear rules of the road to allow innovation to flourish, while mitigating risks.”

That could include clearer rules over holding cryptocurrency in custody to facilitate client trading, using them as collateral for loans, or even holding them on their balance sheets like more traditional assets, according to Reuters.

The U.S. risks being left behind or out-innovated by other countries, according to McWilliams. Countries that are “often not saddled with legacy systems such as ours, are moving forward at a breathtaking pace,” she said. “The United States can simply no longer take for granted that we will be at the forefront of technological advancement. We should not take for granted American exceptionalism, it has to be earned.”

The three main U.S. bank regulators — FDIC, the Federal Reserve and Office of the Comptroller of the Currency — have been working together for several month in what some have called a “crypto sprint,” McWilliams said Tuesday. “Through this process, the agencies are coordinating policies for how and under what circumstances banks can engage in activities involving crypto assets.”

“Fact 1: The Creator of Bitcoin is a Mystery. It is a SPOOK COIN, in a sense,” The Moguldom Nation CEO Jamarlin Martin tweeted. “The US GOV rapidly embracing it now, may have been always part of THE PLAN.”

McWilliams said her objective is to provide clear guidance to the public on how existing rules and policies apply to crypto assets, what types of activities are permissible for banks, and what supervisory expectations regulators have for banks engage in crypto asset activities.

Much of McWilliams’ crypto-focused remarks at the conference was centered around stablecoins — digital assets that are pegged to government-issued currencies like the dollar, The Block Crypto reported. Some examples of stablecoins include Tether (USDT), USD Coin (USDC), and Binance USD (BUSD).

“In order to realize the potential benefits stablecoins have to offer while accounting for potential risks, stablecoins should be subject to well-tailored government oversight,” McWilliams said.

Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?