The Federal Deposit Insurance Corporation (FDIC) is updating its guidelines for banks engaging in crypto-related activities. The changes aim to provide clarity for banks seeking permission to issue tokenized deposits, a potential alternative to stablecoins.
Tokenized deposits would integrate checking accounts with blockchain technology, signaling a shift toward adapting banking infrastructure to the digital asset landscape. Some banks have reportedly engaged with government officials to advocate for offering crypto custody services and exploring this new concept.
In response to a Freedom of Information Act (FOIA) request filed by Coinbase on October 18, the FDIC released documents related to its oversight of banks involved in or seeking to engage in crypto services. The release includes pause letters sent to 24 financial institutions in 2022, advising them to halt or avoid offering crypto-related services.
FDIC Acting Chairman Travis Hill stated that the decision to release these documents reflects a commitment to enhance transparency and fulfill the spirit of the FOIA request. However, Coinbase’s chief legal officer Paul Grewal claims that the regulator retained information because two more letters were included in the uncensored version, and alleges that the FDIC was hiding more pause letters.
The released documents show that banks faced significant resistance from the FDIC when seeking crypto-related services. The regulator repeatedly requested further information and remained silent for months, prompting many banks to abandon their crypto-related offerings. The main reasons cited by the FDIC for pausing services were volatility, reputational risk, and consumer protection risk.
Custodia Bank’s founder and CEO, Caitlin Long, pointed out instances in the documents where the word “deposit” was mentioned, suggesting that the term is used to address US dollar-denominated deposits. The release of these documents provides a glimpse into the FDIC’s stance on crypto banking and highlights the ongoing efforts to clarify guidelines for banks engaging in this area.
Source: https://cryptoslate.com/fdic-to-update-crypto-banking-guidelines-releases-documents-on-pause-letters