The Federal Reserve Board (the “FRB”) issued Supervision and Regulation Letter 22-6 (“SR 22-6”), offering steering for FRB-supervised banking organizations (referred to collectively herein as “FRB banks”) in search of to interact in actions associated to cryptocurrency and different digital belongings.  The letter states that previous to partaking in crypto-asset-related actions, such FRB banks should be sure that their actions are “legally permissible” and decide whether or not any regulatory filings are required.  SR 22-6 additional states that FRB banks ought to notify the FRB previous to partaking in crypto-asset-related actions.  Any FRB financial institution that’s already engaged in crypto-asset-related actions ought to notify the FRB promptly relating to the engagement in such actions, if it has not already executed so.  The FRB additionally encourages state member banks to contact state regulators earlier than partaking in any crypto-asset-related exercise.

These necessities ship a transparent message to FRB banks and actually to all banks that their crypto-asset associated actions are thought of to be dangerous and to not be entered into evenly.

Certainly, the FRB famous that crypto-asset-related actions might pose dangers associated to security and soundness, shopper safety, and monetary stability, and thus a FRB financial institution ought to have in place satisfactory methods, threat administration, and controls to conduct such actions in a protected and sound method and according to all relevant legal guidelines. 

SR 22-6 is much like steering beforehand issued by the OCC and FDIC; in all instances, the companies require banks to inform regulators earlier than partaking in any sort of digital asset exercise, together with custody actions. The three companies additionally launched a joint assertion final November by which they pledged to supply higher steering on the difficulty in 2022.  Additional, in an August 17, 2022 speech, FRB Governor Bowman acknowledged that the FRB employees is working to articulate supervisory expectations for banks on quite a lot of digital asset-related actions, together with:

• custody of crypto-assets

• facilitation of buyer purchases and gross sales of crypto-assets

• loans collateralized by crypto-assets, and

• issuance and distribution of stablecoins by banking organizations

Apparently, SR 22-6 comes just a few days after a bunch of Democratic senators despatched a letter to the OCC requesting that the OCC withdraw its interpretive letters allowing nationwide banks to interact in cryptocurrency actions and a day after Senator Toomey despatched a letter to the FDIC questioning whether or not it’s deterring banks from providing cryptocurrency providers. 

Though previous steering already required banks to inform regulators of crypto exercise, this steering doubtless might discourage extra banks from getting into into crypto-related actions sooner or later or from including extra crypto providers. In the long run, it might have the unlucky impact of constructing it harder for cryptocurrency firms to acquire banking providers.