The Federal Deposit Insurance Corporation (FDIC) has done an about-face on how banks can engage with cryptocurrency-related activities.
In a statement released today, Acting FDIC Chairman Travis Hill stated the regulatory agency was “actively reevaluating our supervisory approach to crypto-related activities. This includes replacing Financial Institution Letter (FIL) 16-2022 and providing a pathway for institutions to engage in crypto- and blockchain-related activities while still adhering to safety and soundness principles.”
Hill stated the FDIC plans to engage with the President’s Working Group on Digital Asset Markets that was created by President Trump in an Executive Order signed on Jan. 23. He also announced the release of 175 documents related to FDIC supervision of banks that sought engagement in cryptocurrency.
“Previously, the FDIC released 25 so-called ‘pause’ letters sent to 24 institutions interested in pursuing crypto- or blockchain-related activities,” Hill said, noting that the released documents “show that requests from these banks were almost universally met with resistance, ranging from repeated requests for further information, to multi-month periods of silence as institutions waited for responses, to directives from supervisors to pause, suspend, or refrain from expanding all crypto- or blockchain-related activity. Both individually and collectively, these and other actions sent the message to banks that it would be extraordinarily difficult—if not impossible—to move forward. As a result, the vast majority of banks simply stopped trying.”
Once banks are allowed to trade or bank crypto assets, the whole idea of fiat currency, backed by governments goes out the window. Also, will banks be allowed to lend with crypto assets as collateral?
The FDIC cannot regulate banks’ real estate and oil & gas industry loans anymore with a straight face. The FDIC considers these loans to be higher risk than other collateralized loans, yet they are backed with real assets.
Yeah, let’s loosen up the banking regulations again as if that hasn’t historically cratered the economy. This will give the big guys a chance to make a bundle and then when it all goes south the average American will get to pay for cleaning up the mess.