The Federal Deposit Insurance Corporation (FDIC) is taking steps to create a more permissive and transparent framework for US banks engaging with cryptocurrency, including the use of public, permissionless blockchains.
At the American Bankers Association Washington Summit on April 8, FDIC Acting Chairman Travis Hill discussed the agency’s evolving stance on crypto-related activities.
Guidelines for engagement with public blockchains
One area of focus is the interaction between regulated banks and public, permissionless blockchains. While other countries have allowed banks to use public chains for years, US banking regulators have been more cautious. The FDIC now believes a total ban on public blockchain use is too restrictive, but there is a need for appropriate guidelines to govern this activity.
The agency is reviewing existing guidance to develop standards for the responsible use of public networks. They are also considering whether public chains can operate in a permissioned mode and how to supervise blockchain configurations that blur the line between open and permissioned environments.
FDIC to issue further guidance
The FDIC plans to release additional guidance on specific digital asset use cases. They are assessing questions related to permissible crypto activities, supervisory treatment of blockchain products, and risk management expectations for banks in this space. The goal is to establish a transparent framework that allows for innovation while maintaining safety and soundness standards.
Stablecoin regulations and deposit insurance frameworks
Hill also addressed stablecoins and potential updates to deposit insurance regulations. The FDIC is evaluating liquidity risk management, safeguards against illicit finance, and cybersecurity standards for stablecoin reserve deposits. They are considering defining permissible activities in this area and expanding regulatory guidance.
Tokenized deposits and smart contract risks
The FDIC is looking at regulatory treatment of tokenized real-world assets and liabilities, including tokenized commercial bank deposits. They are concerned about the ability of counterparties to withdraw funds using smart contracts after a bank failure, which could increase resolution costs. The agency is exploring technical solutions to prevent unintended fund outflows during bank resolution scenarios.
Overall, the FDIC’s changes represent a move towards regulatory clarity for banks exploring digital asset infrastructure. They emphasize the importance of prudent risk controls and further definitional work around permissible activities.