The US Federal Reserve on Tuesday issued additional guidance for banks considering activities involving cryptocurrencies, emphasizing that firms must notify the Fed beforehand and make sure whatever they do is legally permitted.
The Fed said in a statement that while cryptocurrencies could present “potential opportunities” to banks, firms needed to make sure they had systems in place beforehand to ensure the volatile assets did not threaten safety and soundness or consumer protections.
Banks should also notify the Fed before engaging in any crypto-related activities, and any banks that had already pursued crypto initiatives should also notify the Fed about their involvement in the digital asset space, the agency said.
The Fed also encouraged state member banks to alert their state regulator before getting involved in crypto activities.
The Fed said in the supervisory letter that banks supervised by the agency should take several steps before engaging in any crypto-related activities, including determining if existing laws dictated any particular filings and whether any activities under consideration were legally permissible.
Banks should also have adequate risk management systems and controls in place before getting involved in crypto to ensure that any endeavors were conducted in a safe and sound manner and were compliant with relevant consumer protection statutes, the Fed said.
The move comes just days after several Democratic senators led by Massachusetts Sen. Elizabeth Warren called on the US Office of the Comptroller of the Currency (OCC) to rescind its previously issued guidance on crypto and replace it with “a comprehensive approach in coordination with other prudential regulators”.
Last year, US banking regulators including the Fed and the OCC jointly said that they intended to clarify in 2022 what sort of activities banks could engage in involving crypto, including whether firms were able to hold digital assets on their balance sheet and facilitate crypto trades on behalf of customers.