The United States (U.S.) Federal Reserve Board (FRB) issued a policy statement on Friday. In it, the FRB talks about offering all banks having a federal supervisor, a level-playing field, irrespective of deposit insurance status.
Sharing the news, Colin Wu (@WuBlockchain), a Chinese reporter, tweeted:
Federal Reserve stated that it would not prohibit a state member bank, or prospective applicant, from providing safekeeping services for crypto-assets if conducted in a safe and sound manner and in compliance with consumer, anti-money laundering, and anti-terrorist financing laws— Wu Blockchain (@WuBlockchain) January 28, 2023
The Federal Reserve Board states today’s action would not prohibit a state member bank, or prospective applicant, from providing safekeeping services, in a custodial capacity, for crypto-assets if conducted in a safe and sound manner and in compliance with consumer, anti-money laundering, and anti-terrorist financing laws.
By the said statement, the federal reserve clarifies that the FRB-supervised uninsured and insured banks are
Subject to the same limitations on activities, including novel banking activities, such as crypto-asset-related activities.
The FRB-supervised uninsured and insured banks would also attract limitations on some of their activities, the same as national banks. The federal reserve reasons that uniform treatment will
Promote a level playing field and limit regulatory arbitrage.
Apart from that, the concerned statement also directs banks to ensure that their activities are permissible under the law. It means a bank must have risk management processes, internal controls, and information systems to support their activities’ nature, scope, and risks.
Lately, the FRB is seeing a rise in the number of inquiries, notifications, and proposals from banks pertaining to crypto-assets activities. Responding to these queries, the FRB’s statement states such inquiries will be evaluated in consonance with the “longstanding practice.”
In related digital assets news, the U.S. Securities and Exchange Commission (SEC) has reportedly started to probe registered investment advisors’ (RIAs) over compliance in “custody of client crypto assets.”
While the SEC has long been advising RIAs to follow its digital assets’ custody rules, the pressing urge has heightened after the FTX scam. Legally, the RIAs are not permitted to have client funds or securities in custody without complying to assets protection stipulations.
Anthony Tu-Sekine, Head, Blockchain and Cryptocurrency Group, Seward and Kissel, says,
This is an obvious compliance issue for investment advisers. If you have custody of client assets that are securities, then you need to custody those with one of these qualified custodians.
The SEC’s current accounting guidelines make it highly “capital-intensive” for the lenders to pursue the custody of clients’ digital assets. This has limited the scope for advisers scouting for custodians.