Associations Push for Regulatory Clarity on Digital Assets

In a joint letter, financial industry trade associations urged the President’s Working Group on Digital Asset Markets ("PWG") to take specific steps toward codifying a unified, "technology-neutral" regulatory framework on digital assets and to provide guidance that supports the ability of banks to engage in digital asset activities. 

In the letter to PWG Chair David Sacks, the signatories, including the Bank Policy Institute, American Bankers Association, American Fintech Council, Financial Services Forum, SIFMA, The Clearing House Association, and the Association of Global Custodians (collectively, "associations") asked the PWG to include in its report to the President a series of regulatory recommendations aimed at advancing clarity in the digital asset sector. The recommendations are built on their previous communications with PWG. (See related coverage.)

The associations also recommended that the agencies "issue joint guidance (and ultimately, regulations)" to ensure that the permissibility of a banking activity does not depend on the technology used. The associations asked the Federal Reserve to eliminate its "Novel Activities Supervision Program," which they described as "technology-specific" and inconsistent. The associations also called for clear regulatory permission for banks to interact with public blockchains and to hold small amounts of digital assets. 

The associations recommended that regulators clarify risk management expectations for digital asset activities, emphasizing that "legal permissibility is a necessary but not sufficient condition." They called for "public, uniform guidance" and underscored the need for consistent AML, CFT, and sanctions standards. They also warned that applying Basel’s 1,250% risk weight measure "on any asset issued on a public blockchain to which banks have exposure" would effectively block banks from using public blockchains and urged that any capital rules be "based on robust empirical analysis."

The associations also recommended that the agencies implement an "expedited process" for reviewing novel digital assets proposals. They stated that this process should provide timely and public responses to banks seeking clarity on permissibility or risk expectations. The associations warned that the prior "non-objection" processes were inconsistent, and that "guidance should ultimately be adopted via rulemaking … to ensure consistency and durability."

The associations offered to meet with the PWG to discuss their recommendations and emphasized that clearer, forward-looking rules would help the U.S. maintain global leadership in digital finance.