FDIC urges regulators to clarify the rules for banks’ work with cryptocurrencies

According to the corporation’s vice chairman, officials’ current stance hinders innovation

12.03.2024 - 08:35

730

3 min

What’s new? Travis Hill, the vice chairman of the US Federal Deposit Insurance Corporation (FDIC), has criticized regulators for restricting banks from providing cryptocurrency-related services. According to him, officials should take a proactive stance and clarify their attitude towards the industry, as their current actions hinder innovation.

Material by Bloomberg

What else is known? Hill acknowledged that it can be difficult to develop a comprehensive regulatory framework for an area with rapidly evolving technology. However, he noted that officials should provide clarity on how to handle cryptocurrency products.

Last year, the FDIC, along with the Fed and the Treasury Department’s Office of the Comptroller of the Currency (OCC), issued a warning to banks about the risks associated with working with digital assets. Bank regulators expressed concerns about the volatility of cryptocurrencies and said that risks that cannot be controlled should not be extended to the banking system.

According to Hill, this stance has created the impression that the FDIC is not willing to work with industry players using blockchain technology for non-cryptocurrency-related activities such as deposit tokenization. As such, Hill asked financial regulators to distinguish between cryptocurrencies and tokenization.

Separately, Hill criticized the Securities and Exchange Commission’s (SEC) guidance that requires firms to protect customers’ crypto assets by accounting for them on their balance sheets as a liability. He said this approach is in stark contrast to how custodians handle other assets, which are typically accounted for off-balance sheet and treated as the property of the client rather than the custodian.

Coinbase criticizes the US Treasury Department’s accounting requirements for cryptocurrency mixing transactions

According to the exchange, the new measures of the agency create additional unnecessary work

Earlier, Circle CEO Jeremy Allaire and Ripple CEO Brad Garlinghouse allowed the possibility of the adoption of the legislation to regulate stablecoins in the United States this year.

Author: