The Federal Reserve today rescinded a 2023 statement on how it would evaluate requests from non-FDIC insured banks to engage in cryptocurrencies and replaced it with a new statement to potentially lower the barrier for those institutions to get approval.
The 2023 statement said that state-chartered but non-FDIC-insured financial institutions “will be subject to the same limitations on activities, including novel banking activities, such as crypto-asset-related activities.” The new statement maintains that principle but adds that different activities should be subject to different regulations. As a result, it “acknowledges that uninsured state member banks may be permitted by the board to engage in activities as principal that are impermissible for insured state member banks, provided that such activities are conducted in a manner consistent with bank safety and soundness and preserving the stability of the U.S. financial system,” according to a board memo.
Fed Vice Chair for Supervision Michelle Bowman said the new statement was issued in recognition that new technologies offer efficiencies to banks and improved products and services to bank customers. “By creating a pathway for responsible, innovative products and services, the board is helping ensure that the banking sector remains safe and sound while also modern, efficient, and effective,” she said.
Fed Governor Michael Barr dissented, noting that the original statement passed by unanimous consent under the principle that the same bank activity should be subject to the same regulation. “Therefore, I cannot agree to rescind the current policy statement and adopt a new one that would, in effect, encourage regulatory arbitrage, undermine a level playing field and promote incentives misaligned with maintaining financial stability,” he said.
