Crypto-Banking Regulation Is Coming Sooner Than Expected, According to Morgan Stanley

• According to a Morgan Stanley research report issued last week, regulators are trying to draft a set of guidelines for crypto banks sooner than expected
• The Morgan Stanley analysts stated Well-crafted legislation will assist to boost the uptake of crypto assets and related services
• The memo lists custody; facilitation of client purchase or sales of crypto assets; loans collateralized by crypto assets; creation and distribution of stablecoins

According to a Morgan Stanley research report issued last week, regulators are trying to draft a set of guidelines for crypto banks sooner than expected. The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued a joint statement on Nov. 23 outlining a policy-sprint to draught guidelines for enterprises offering services in the crypto area. The fact that authorities were working on this framework was already known, according to the study, but their feeling of urgency is a plus for getting new laws in place sooner rather than later.

The Morgan Stanley analysts stated Well-crafted legislation will assist to boost the uptake of crypto assets and related services. This is good news for cryptocurrency banks like Silvergate and Signature. The bank sees the biggest risk as policymakers move too quickly and inadvertently inhibit the adoption of cryptocurrencies. While this isn’t the bank’s base case, regulators could still, in theory, adopt a highly restrictive stance on crypto-related services that severely stifle their growth. 

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The memo lists custody; facilitation of client purchase or sales of crypto assets; loans collateralized by crypto assets; creation and distribution of stablecoins; and operations involving the keeping of crypto assets on banks’ balance sheets as services that will be covered under the new framework. The bank also stated that regulators will examine possible capital and liquidity norms for banks to comply with when providing crypto-related services.