FRB Aligns Federal and State Bank Policy on Crypto
Commentary by Thomas Delaney
The Federal Reserve Board (i) rescinded a 2023 policy statement on supervisory expectations related to "novel and unprecedented" activities, (ii) withdrew Supplementary Information on specific crypto-asset activities, and (iii) issued a new statement "designed to facilitate innovation by state member banks in a manner that is consistent with bank safety and soundness."
FRS Rule 208.112 ("Policy Statement on section 9(13) of the Federal Reserve Act"), concerns the limits that the Federal Reserve may place on the activity on state member banks. The 2023 statement established a rebuttable presumption (subject to the possibility of obtaining exemptions) that state member banks could not engage in any activity that was impermissible for national banks and further, if national banks could engage in an activity, state banks could engage in the same activity only if they complied with the same conditions that were applicable to national banks. The statement was expressly intended to limit the activities of state member banks with respect to crypto assets.
The new policy statement re-articulates the Board's commitment to "same activity, same risks, same regulation." It generally assumes that state member banks should be able to carry out the same activities as a national bank, but subject to the same conditions. The Fed stated that the Board also "reiterate[s] to state member banks that legal permissibility is a necessary, but not sufficient, condition to establish that a state member bank may engage in a particular activity. . . [a] state member bank ... must at all times conduct its business and exercise its powers with due regard to safety and soundness." The difference in the two statements is the absence of any negative reference to crypto in the new statement. Crypto is OK for state banks to the same extent as for national banks.
The effective date of the new policy is upon publication in the Federal Register.
Commentary
The new guidance issued by the FRB aligns federal policy governing crypto-related activities of state member banks with those that have been approved recently for national banks by the OCC. Historically, activities in which state member banks can engage have been pegged to those permitted for national banks. Arguably the OCC’s approval earlier this month, permitting national banks to engage as riskless principal in crypto transactions, gave national banks an advantage over state member banks. The guidance issued by the FRB should eliminate that gap and should put state member banks on par with national banks in the realm of providing crypto-related services.