FDIC Revokes Crypto Approval Requirement, Encourages Bank Engagement
2min read The U.S. Federal Deposit Insurance Corporation (FDIC) has made a significant policy shift by revoking its earlier order that required banks to obtain approval prior to engaging with cryptocurrency or any other digital assets. This new policy, announced on March 28, represents a notable change in regulatory approach. By removing this regulatory barrier, the FDIC aims to encourage more banks to explore and offer crypto services without the fear of denial or delay.
The FDIC has withdrawn its FIL-16-2022, a regulation that previously mandated banks to seek permission before engaging in cryptocurrency-related activities. The new ruling allows banks supervised by the FDIC to offer cryptocurrency services without seeking FDIC approval, provided there is effective risk management. The regulation emphasizes that FDIC-supervised institutions may engage in permissible activities, including those involving new and emerging technologies such as crypto-assets and digital assets, as long as they adequately manage the associated risks. The FDIC expects that all activities are conducted in a safe and sound manner and in compliance with all applicable laws and regulations.
FDIC’s acting chairman, Travel Hill, stated that this action marks a turning point from the previous three years' approach. He expects this to be one of several steps the FDIC will take to outline a new approach for how banks can engage in crypto- and blockchain-related activities in accordance with safety and soundness standards. This new guidance follows a federal order from President Donal Trump, which aims to strengthen America’s position in digital assets and establish friendly policies for digital asset stockpiles. The purpose of the policy is to support the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy.
With fewer regulatory hurdles, banks are now more inclined to provide crypto services such as stablecoin payments, blockchain transactions, and safe crypto storage. Previously, many large banks avoided crypto due to unclear regulations. However, the new move by the FDIC has boosted their confidence to venture into digital assets. Experts believe that more transparent regulations will prompt more banks to offer crypto services, potentially introducing a significant amount of money into the digital asset economy. The President and CEO of American Bankers Association, Rob Nixon, praised the move, stating that it removes an obstacle that led banks to engage more cautiously in the digital asset market. This regulatory clarity is critical to enhancing innovation in the space and allows customers to obtain innovative products and services through their trusted bank relationships.
This move by the FDIC indicates that the government is becoming more receptive to new concepts in digital finance. With fewer barriers, banks can now explore crypto services, which may open up more choices and advantages for the common consumer. However, banks must still exercise caution and mitigate risks while venturing into new ground. In summary, while this is an exciting step forward, it is essential to closely monitor the growth of digital banking as it continues to evolve.
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