By Joe Light
A top banking regulator rescinded seemingly minor guidance that will nevertheless boost crypto's role at traditional financial institutions.
The Federal Deposit Insurance Corp. on Friday said it was formally revoking a Biden-era letter that required banks to get pre-approval before engaging in crypto-related activities. Because banks and crypto firms said the FDIC was slow to give the approval -- if the agency did at all -- the guidance essentially kept most banks from touching crypto or blockchain-related technologies. Acting FDIC Chairman Travis Hill last month telegraphed that such a change was coming.
Banks over the last couple of months have met with the FDIC and other regulators to discuss new crypto-related products or services they want to offer, including "tokenized" deposits and crypto custody services, Barron's reported in February. Bank of America CEO Brian Moynihan earlier this year said "banks will come in hard on the transactional side" of crypto, if the rules allow it.
The FDIC's move is the latest crypto-boosting initiative to come out of the administration of President Donald Trump, who during the campaign promised to make the U.S. the "crypto capital of the world." Trump has created a crypto task force headed by venture capitalist David Sacks and the Securities and Exchange Commission has swiftly dropped cases against firms including Coinbase Global and Ripple Labs that alleged they broke securities laws, even in cases where judges had already ruled that the government's claims had enough merit to move forward in court.
The FDIC said its guidance affirms that banks it supervises "may engage in permissible activities, including activities involving new and emerging technologies such as crypto-assets and digital assets, provided that they adequately manage the associated risks." The agency said it planned to issue more guidance on how banks could engage in specific crypto-related activities as it worked with Trump's crypto task force.
Paul Atkins, Trump's pick to lead the SEC, in his Senate Banking Committee confirmation hearing on Thursday said establishing a crypto regulatory framework was his "top priority." Jonathan Gould, the nominee to head the Office of the Comptroller of the Currency, said changes needed to be made to ensure firms weren't " debanked" as a result of their involvement in crypto.
Banks' interest in crypto has waxed and waned as tokens' popularity has skyrocketed, crashed, and been resurrected amid fraud and other scandals. Regulators have said exposure to crypto firms played a role in bringing down Silvergate Bank and Signature Bank in 2023.
If banks decide to take on more crypto-related business, easy places to start could include providing more services to broker cryptocurrencies like Bitcoin or help customers custody them.
Further off, some banks have expressed interest in "tokenizing" bank deposits so that they can easily be sent between customers or businesses on the blockchain, a move that would essentially create a bank competitor to so-called stablecoins, which are typically pegged to the dollar and backed by reserves like Treasuries.
Write to Joe Light at joe.light@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 28, 2025 15:36 ET (19:36 GMT)
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