US banking agencies announced their plans on the regulations on cryptocurrencies on Tuesday; they issued a to-do list for the coming year. In addition, they announced a new policy wherein banks would need permission to offer digital currency products.
In a joint statement, the Fed and other banking institutions put forth an agenda that highlighted areas of focus, how they plan to weigh custody, loans involving cryptocurrency, and the room for capital standards.
Moreover, the Comptroller of the Currency’s office stated that banks looking to engage with digital coins would have to get an additional sign-off from the regulator.
“For the year 2022, the agencies plan to further clarify about legality of activities related to crypto-assets conducted by banking organizations,” the Fed, the Comptroller of the Currency Office, and Federal Deposit Insurance Corp. stated.
The agenda does not alter the current regulations, but the topics officials want to clarify next year could shape the regulations on banks using crypto. The new “crypto-asset road map” is quite similar to the moves made by OCC in 2020 in lieu of opening banking to digital coins during the term of Brian Brooks. However, the current Acting Comptroller, Michael Hsu, ceased the efforts.
The banking regulators conducted a “crypto sprint” to know how agencies approved crypto and settled on several areas that needed clarification. The issues are:
- How banks should maintain crypto assets custody efficiently
- How firms can help consumers make transactions
- How to issue stablecoins
- The capital and liquidity standard for lender’s crypto holdings
Followed by the release of the road map, the OCC put out a new policy explaining to banks how to interpret its previous crypto directives. For example, Hsu’s agency instructed the banks under it to seek pre-approval prior to managing custody of digital coins, backing stablecoins by holding deposited dollars, and managing crypto transactions tied to a distributed ledger. The agency also asked its lenders to seek special permission and demonstrate sufficient risk controls for the OCC to sign off.
The OCC and other agencies, followed by their roadmap for 2022, might soon weigh new rules to regulate tokens similar to bank assets. For example, the President’s Working Group on Financial Markets wants Congress to pass legislation that allows only regulated banks to issue stablecoins. In addition, the group of agency heads asked for assessment by government overseers to know if the token is risky for the wider financial system.
Regardless, it’s hard to say if the three bank agencies will come to an agreement any time soon. The OCC still awaits a permanent leader’s confirmation; on the other hand, the Biden administration is yet to nominate a vice-chairman to supervise Fed’s work. In the meantime, Jelena McWilliams, a Trump administration appointee, still runs the FDIC.