US exploring how banks can hold and trade cryptocurrency like traditional assets, FDIC chairman says
- The chairman of the Federal Deposit Insurance Corporation said bank regulators are trying to provide a road map for banks to engage with crypto assets
- Regulators need to mitigate risk while allowing banks to operate in the crypto space, Chairman Jelena McWilliams said
Jelena McWilliams, who chairs the Federal Deposit Insurance Corporation, told Reuters in an interview on Monday that a team of US bank regulators is trying to provide a road map for banks to engage with crypto assets.
That could include clearer rules over holding cryptocurrency in custody to facilitate client trading, using them as collateral for loans, or even holding them on their balance sheets like more traditional assets.
“If we don’t bring this activity inside the banks, it is going to develop outside of the banks. … The federal regulators won’t be able to regulate it.”
The rapid emergence of cryptocurrency has led to a murky regulatory picture in the United States. Under previous leadership, the OCC took an aggressive approach to bringing cryptocurrency into banks, including blessing bank custody services for cryptocurrency, while other agencies were slower to act.
Those decisions are now under review, according to acting Comptroller Michael Hsu.
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Some banks have already begun dabbling in these areas without regulatory clarity. Earlier this month, US Bancorp announced it was launching a cryptocurrency custody service for institutional investment managers.
But comments from McWilliams, a Republican holdover from the Trump administration, suggests regulators are still seeking a way to incorporate cryptocurrency into traditional bank oversight.
“My goal in this inter-agency group is to basically provide a path for banks to be able to act as a custodian of these assets, use crypto assets, digital assets as some form of collateral,” McWilliams said on a conference panel.
“At some point in time, we’re going to tackle how and under what circumstances banks can hold them on their balance sheet.”
McWilliams acknowledged the challenges.
The easiest issue would be getting regulators to lay out a road map for providing custody to crypto assets, she said. However, it is difficult to figure out how to allow the volatile asset as collateral and include it on bank balance sheets, she added.
“The issue there is … valuation of these assets and the fluctuation in their value that can be almost on a daily basis,” McWilliams said. “You have to decide what kind of capital and liquidity treatment to allocate to such balance sheet holdings.”
