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The Federal Deposit Insurance Corporation (FDIC) is examining ways for banks to hold cryptocurrency, according to Reuters.
A Crypto Roadmap for Banks
Jelena McWilliams, Chairman of the FDIC, said that a team of regulators is developing a roadmap for crypto holdings.
That roadmap will likely include rules around holding crypto in custody, using cryptocurrency for loan collateral, and holding cryptocurrencies on balance sheets as an investment.
McWilliams argued that banks should be allowed to hold crypto “while appropriately managing and mitigating risk.” She added that banks will otherwise be outpaced by private industry: “If we don’t bring this activity inside the banks, it is going to develop outside of the banks [and] federal regulators won’t be able to regulate it.”
McWilliams also acknowledged that price volatility could be an issue for banks. She noted that fluctuations in the value of cryptocurrencies can occur “almost on a daily basis,” which would affect capital allocation and liquidity treatment.
Are Banks Already Using Cryptocurrency?
Though the FDIC has not yet acted, various banks are already working with cryptocurrency. This month, U.S. Bank announced crypto custody services. Special banks such as Avanti, created by Wall Street veteran Caitlin Long, are also working with crypto assets.
Additionally, third parties like NYDIG and Visa are helping customers purchase cryptocurrencies through their banks.
Last year, the Office of the Comptroller of the Currency (OCC) gave banks extensive abilities to work with stablecoins. Banks gained the ability to hold and transact with stablecoins and even run nodes for blockchain networks underlying those stablecoins.
The FDIC’s plans, however, are part of a larger “sprint” that aims to build a joint framework with the Federal Reserve and the OCC. This would create more comprehensive crypto regulation.
Disclaimer: At the time of writing this author held less than $75 of Bitcoin, Ethereum, and altcoins.