US Federal Reserve Board Issues Policy Statement That Limits Banks’ Crypto Related Activities

The United States Federal Reserve Board said on Jan. 27 that both insured and uninsured banks will be subjected to limits on certain activities including those that are associated with crypto assets. The board’s latest action does not preclude a state member bank or prospective applicant from providing crypto-assets safekeeping services.

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

The statement also clarifies that the institutions will be subjected to the limitations “on certain activities” which fall under the auspices of 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 attempting to “promote a level playing field” but is also seeking to “limit regulatory arbitrage.”

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

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

In recent years, the Board has received a number of inquiries, notifications, and proposals from banks regarding potential engagement in novel and unprecedented activities, including those involving crypto-assets. In response, the Board’s statement specifies how it will evaluate such inquiries, consistent with longstanding practice.

Meanwhile, the statement clarified that the board’s latest action does not, however, preclude a state member bank or prospective applicant from providing crypto-assets safekeeping services. This is only permissible 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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