Evaluating Crypto-Asset Risks Will be Top Priority in 2022, Says FDIC Report

Evaluating Crypto-Asset Risks Will be Top Priority in 2022, Says FDIC Report

The Federal Deposit Insurance Corporation (FDIC) has listed evaluating crypto asset risks as one of its top priorities for the year.

In addition to evaluating risks related to crypto, other priorities on the list included bolstering the Community Reinvestment Act, addressing financial risks posed by climate change, reviewing the bank merger process, and finalizing the Basel III Capital Rule. According to Acting Chairman Martin Gruenberg, all of these priorities will require close collaboration among the federal banking agencies.

In its evaluation, the FDIC stated that the rapid integration of digital assets into the financial system as it currently exists could pose significant risks to its fundamental safety. It stressed that banks should thoughtfully consider the risks posed by these products before they can safely engage in crypto-asset-related activities.  

“To the extent such activities can be conducted in a safe and sound manner, the agencies will need to provide robust guidance to the banking industry on the management of prudential and consumer protection risks raised by crypto-asset activities,” the statement read.

FDIC’s role in crypto

Last year, the FDIC collaborated within an interagency team of US banking regulators, including the Federal Reserve, and the Office of the Comptroller of the Currency, in an attempt to establish a regulatory roadmap for banks to offer crypto services. Specifically, they addressed clearer rules regarding holding cryptocurrency to facilitate client trading, using them as collateral for loans, and holding them on balance sheets as assets. However, the volatility of cryptocurrencies makes it difficult to determine their value as collateral, or how to include them on bank balance sheets.

Earlier in May 2021, the FDIC had acknowledged novel and unique considerations related to digital assets. It then proceeded gathering comments and information from interested parties to better understand the industry’s and consumers’ interests in the digital assets, following banks’ early interest and participation in the digital asset ecosystem. So far, the FDIC has partnered with crypto custodian firm Anchorage to help it liquidate any bank’s crypto assets.

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