U.S. Federal Reserve Board Issues Policy Statement Limiting Crypto-Related Activities by Banks CryptoBlog

The U.S. Federal Reserve Board said on Jan. 27 that insured and uninsured banks would be subject to limits on certain activities, including those associated with crypto-assets. The council’s latest action does not prevent a member state bank or potential candidate from providing crypto-asset custody services.

Limit regulatory arbitrage

The United States Federal Reserve Board has issued a new policy statement which states that insured and uninsured banks under its supervision will be subject to the “same limitations on activities, including new banking activities, such as activities related to crypto-assets”.

The statement also clarifies that institutions will be subject to limitations “on certain activities” that fall under the Office of the Comptroller of the Currency (OCC). According to the statement, by imposing limits on the activities of financial institutions, the board is not only trying to “promote a level playing field” but also seeks to “limit regulatory arbitrage”.

The policy statement, which is effective upon publication in the Federal Register, implores banks to ensure that their business is honest and conducted “in a safe and sound manner.” This can be achieved by putting in place risk management processes, internal controls as well as information systems.

Member State banks are not prevented from providing crypto-asset custody services

On why it decided to issue the policy statement, the Federal Reserve Board said it has seen an increase in the number of inquiries or proposals from financial institutions wishing to engage in non-traditional activities.

Over the past few years, the Board has received a number of inquiries, notifications and proposals from banks regarding potential engagement in new and unprecedented activities, including those involving crypto-assets. In response, the Commission’s statement sets out how it will assess such requests, in accordance with long-standing practice.

Meanwhile, the statement clarified that the latest board action does not, however, prevent a member state bank or potential candidate from providing crypto-asset custody services. This is only permitted when “conducted in a safe and sound manner and in compliance with consumer, anti-money laundering and anti-terrorist financing laws”.

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Terence Zimwara

Terence Zimwara is an award-winning journalist, author and writer in Zimbabwe. He has written extensively on the economic issues of some African countries as well as how digital currencies can provide an escape route for Africans.

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