On January 3, 2023, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation issued a joint statement about the dangers of dealing with crypto-assets, which they define as “digital asset[s that are] implemented using cryptographic techniques.” Addressed to the chief executive officers of all national banks, federal savings associations, and federal branches and agencies and their key personnel, the letter points to several categories of risk that banking organizations must guard against. These include uncertainty, fraud, inaccurate disclosures, volatility, contagion risk resulting from interconnections among crypt-asset participants, lack of robustness in the governance practices of crypto-asset participants, the absence of oversight mechanisms, and the lack of standards governing contractual responsibility and liabilities for unplanned circumstances.
The agencies expressed particular concern about risks in the crypto-asset sector spilling over into the banking system, noting that, “[g]iven the significant risks highlighted by recent failures of several large crypto-asset companies, the agencies continue to take a careful and cautious approach related to current or proposed crypto-asset-related activities and exposures.” Hence, although providing banking services to crypto-asset customers is not prohibited, the agencies continue to examine whether such activities can be conducted in a manner that adequately protects consumers and complies with applicable laws and regulations. Under current conditions, the agencies believe that issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network is probably not consistent with safe and sound banking practices.
The agencies therefore encourage the banking organizations they supervise to engage in “robust supervisory discussions” with them before engaging in specific crypto-asset-related activities, and, if they elect to go forward with such activities, to ensure that such activities comply with applicable laws and regulations – including those designed to protect consumers from unfair, deceptive or abusive practices – and involve appropriate risk management measures.