Assessing whether engaging in crypto-asset-related activities are legally permissible and determining whether any regulatory filings are required prior to engaging in the activities are steps outlined for banks in a supervisory letter issued Tuesday by the Federal Reserve.
Dubbing the letter “additional information for banking organizations engaging or seeking to engage in crypto-related assets,” the Fed supervisory letter acknowledged that while crypto presents “potential opportunities” to banks and their customers, it also advised caution. “Crypto-asset-related activities may also pose risks related to safety and soundness, consumer protection, and financial stability,” the letter stated.
In particular, the letter lists particular risks in technology and operations, anti-money laundering (AML) and the countering of financing of terrorism (CFT), consumer protection and legal compliance, and financial stability.
“Certain types of crypto-assets, such as stablecoins, if adopted at large scale, could also pose risks to financial stability including potentially through destabilizing runs and disruptions in the payment systems,” the letter asserts.
And the Fed is watching developments closely, the letter indicates. “Given the heightened and novel risks posed by crypto-assets, the Federal Reserve is closely monitoring related developments and banking organizations’ participation in crypto-asset-related activities,” the letter states.
Regarding permissibility and filing requirements, the letter advises banks to consider their requirements under federal banking laws, specifically the Bank Holding Company Act, Home Owners’ Loan Act, Federal Reserve Act, Federal Deposit Insurance Act, or the regulations implementing those laws.
In addition to assessing permissibility and determining reporting requirements, the letter states that banks and their organizations should notify the Fed prior to engaging in crypto-asset-related activities.
The letter also stresses that banks should have “adequate systems and controls in place to conduct crypto-asset-related activities in a safe and sound manner prior to commencing such activities.”