On November 23, 2021, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency (collectively, “Supervisory Agencies”) issued the Joint Statement on Crypto-Asset Policy Sprint Initiative and Next Steps (“Joint Statement”).[1] The Supervisory Agencies’ subject-matter experts and staff collaborated to identify opportunities and risks associated with crypto-asset-related activities of banking institutions and to clarify a framework to “promote safety and soundness, consumer protection, and compliance with applicable laws and regulations.”[2]
The Supervisory Agencies’ evaluated current crypto-asset-related activities that banking organizations may seek to engage in, including: (1) custody of digital assets; (2) purchases and sales of digital assets; (3) use of digital assets to collateralize loans (and perhaps other financing transactions); (4) use of digital assets, including stablecoins, to facilitate payments; and (5) activities that result in a banking organization holding digital assets on their balance sheet (collectively, “Digital-Assets Activities”). The Joint Statement did not offer any conclusions. Instead, it announced a framework to analyze Digital-Asset Activities, including:
- Developing a common vocabulary regarding Digital-Assets Activities;
- Identifying and assessing key risks around safety and soundness, consumer protection, compliance, and evaluation of the legal permissibility related to potential Digital-Assets Activities conducted by banking organizations; and
- Analyzing areas where existing regulations and guidance apply to Digital-Asset Activities and where clarification is needed.
The Supervisory Agencies plan to provide clarification about Digital-Asset Activities in 2022. The Supervisory Agencies also plan to offer guidance on the application of bank capital and liquidity standards related to digital assets involving U.S. banking institutions and to continue working with the Basel Committee on Banking and other regulators responsible for supervision of digital assets.
Despite the growth of digital assets in recent years, the Joint Statement gave the impression that the Supervisory Agencies are at the starting line in their effort to fully regulate digital assets while market participants are accelerating further down the track. Nevertheless, market participants should greet 2022 with optimism at federal regulators’ acknowledgement that digital assets, though at a nascent stage, are a growing part of our financial system that is unlikely to retreat. Now, market participants must work with regulators to accelerate creation of a regulatory scheme that, at a minimum, avoids stifling innovation while protecting consumers, thus cementing U.S. leadership in this space.
[1] Joint Statement on Crypto-Asset Policy Sprint Initiative and Next Steps (Nov. 23, 2021). [back]
[2] Id. [back]
