The United States Federal Reserve Board said on Jan. 27 that both insured and uninsured banks will be subject to limits on certain activities, including those associated with crypto assets. The latest board action does not prevent a state member bank or potential applicant from providing custody services for crypto assets.
Limitation of regulatory arbitrage
The US Federal Reserve Board has issued a new policy statement saying that both insured and uninsured banks under its supervision will be subject to the “same limitations on activities, including novel banking activities such as activities related to crypto assets”.
He declaration it also clarifies that the institutions will be subject to the limitations “on certain activities” that fall under the auspices of the Office of the Comptroller of the Currency (OCC). According to the statement, by imposing limits on the activities of financial institutions, the board is not only trying to “promote a level playing field” but also seeking to “limit regulatory arbitrage.”
The policy statement, which takes effect upon publication in the Federal Register, implores banks to ensure that their activities are transparent and conducted “in a safe and sound manner.” This can be achieved through the implementation of risk management processes, internal controls and information systems.
Member state banks are not excluded from providing custody services for crypto assets
Asked why it decided to issue the policy statement, the Federal Reserve Board said it had seen an increase in the number of inquiries or proposals from financial institutions wanting to engage in non-traditional activities.
In recent years, the Board has received a number of inquiries, notifications, and proposals from banks regarding potential involvement in novel and unprecedented activities, including those involving crypto assets. In response, the Board’s statement specifies how it will assess such inquiries, in keeping with longstanding practice.
Meanwhile, the statement clarified that the latest board action, however, does not prevent a state-owned member bank or prospective applicant from providing custody services for crypto assets. This is only permissible when “carried out securely and in compliance with consumer, anti-money laundering, and anti-terrorist financing laws.”
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