U.S. FDIC Eases Rules for Banks Offering Crypto Services

FDIC New Rule Repeals the Prior Approval Rule for Crypto Services.

The Federal Deposit Insurance Corporation (FDIC) revised guidelines for the banks regarding participation in cryptocurrency activities with no need for prior approval, which signals a new trend for policies related to digital assets. The guidelines include permission for the financial firms to participate in activities related to digital currency without any prior approval.

FDIC Removes Old Notification Rule

The FDIC has canceled its previous policy from April 7, 2022, known as “Notification of Engaging in Crypto-Related Activities” (FIL-16-2022). That rule required FDIC-supervised banks to notify the agency before starting any crypto services. With the new update, Bank can offer digital asset services freely as long as they follow existing rules and manage risks properly.

Key Highlights of the New Rule

FDIC-supervised banks can now provide crypto services without needing prior approval.

Allowed crypto activities include:

• Use new technology: Financial institutions can use blockchain, but they must manage risks properly.
  

• Offer services related to digital currency: They can hold stablecoin reserves, create tokens, and store them safely for customers.
  

• Join the blockchain network: Banking organisations can act as nodes (parts of the network), give crypto loans, and help with blockchain exchanges or redemptions.
  

• Manage risks: Banks must protect against cyberattacks, handle market risks, and deal with liquidity issues. They must also follow anti-money laundering (AML) rules.
  

• Follow financial rules: The FDIC expects banks to follow all financial regulations and operate safely.

This new rule gives banks more freedom to explore market activities while ensuring they stick to safety standards.

Impact of the notification on the Market 

The revision in the  guideline is considered positive by industry experts, as it will no doubt benefit the institutions involved in the crypto sector. Bo Hines gave a statement in X’s post, saying it was a “Big Win”. He is the Executive Director of the Presidential Council of Advisers for Digital Assets. 

Source: X

This new rule makes it easier for banking organisations to operate in this industry. Before, banks had to get approval from the corporation before doing anything related to crypto. Now, they no longer need permission.

Other U.S. regulators are also becoming more open to this industry. For example, the Office of the Comptroller of the Currency (OCC) recently removed restrictions on Federally Chartered Banks, letting them offer crypto services without extra approval. Previously the regulations like “operation choke point 2.0” restricted access to crypto firms towards banking. 

The FDIC is also working with the President’s Working Group on Financial Markets to create clearer rules for this market. Even though financial institutions have more freedom now, the corporation plans to give more detailed instructions on specific activities in the future. This update will influence the cryptocurrency and digital asset industry on a global level. 

This new rule offers more freedom to financial firms to offer digital asset services. Now, the bank does not need any prior approval. This action shows that regulators of the U.S. are becoming more flexible with digital assets. The council has supported innovation by removing entry barriers. They only ask for the management of potential risks and adherence to regulations related to cryptocurrency.