FDIC Reverses U.S. Crypto Banking Policy That Demanded Prior Approvals
The Federal Deposit Insurance Corp. (FDIC) has made a significant shift in its approach to banks engaging in crypto activities. Previously, banks were required to seek prior approval from the FDIC before getting involved in any crypto-related matters. This standard was set in 2022 and resulted in many banks being disconnected from the digital assets sector as they waited for approvals that never materialized.
The FDIC, as the primary federal supervisor of thousands of smaller banks, played a crucial role in the de-banking of crypto-related businesses. A legal battle with crypto exchange Coinbase revealed a series of letters between the regulator and the banks it supervised. In these letters, the FDIC instructed banks to refrain from entering into new crypto activities while it formulated policies. However, the agency failed to develop any concrete guidelines, leaving banks in limbo.
The recent change in industry guidance, issued by the FDIC, comes after President Donald Trump appointed a more crypto-friendly leadership at the FDIC and other financial regulators. The new guidance eliminates the requirement for banks to seek pre-approvals for crypto activities, allowing them to move forward as long as they assess and manage the associated risks appropriately.
Travis Hill, the Acting Chairman of the FDIC, stated, “With today’s action, the FDIC is turning the page on the flawed approach of the past three years. I expect this to be one of several steps the FDIC will take to lay out a new approach for how banks can engage in crypto- and blockchain-related activities in accordance with safety and soundness standards.”
The move by the FDIC has been applauded by industry experts, including Bo Hines, the White House’s director of its council of digital assets advisers, who described it as a “huge step forward” in a social media post.
Previously, all three U.S. banking agencies, including the Federal Reserve and the Office of the Comptroller of the Currency, required banks to seek pre-approvals for crypto activities. The OCC recently rescinded its similar 2022 guidance, which was issued during a turbulent period for the digital assets sector, marked by failures and high-profile fraud cases.
Overall, the FDIC’s decision to remove the pre-approval requirement for banks engaging in crypto activities signals a more favorable regulatory environment for the industry. This change aligns with the Trump administration’s direction to facilitate greater participation in the crypto sector and allows banks to explore opportunities in this rapidly evolving space.
