U.S. banks must seek regulatory approval before engaging in certain cryptographic activities

By Pete Schroeder

WASHINGTON (Reuters) – U.S. banks must seek and obtain the written permission of their bankers before engaging in certain cryptocurrency activities, a major regulator said on Tuesday.

The Office of the Currency Controller said banks need to demonstrate that they have the right tools in place to manage risks before taking on activities such as providing surveillance services for cryptocurrency holders.

“Because many of these technologies and products are new to risks, banks need to demonstrate that they have adequate risk management systems and controls in place to perform them safely,” said Michael Hsu, an acting auditor.

The regulator’s new stance puts a bigger bar on banks when it comes to some cryptographic activities, after the agency under the command of former President Donald Trump cleared the way for banks to do some cryptographic work.

According to the new letter of interpretation, banks are not allowed to engage in various crypto-related activities, such as providing custody of cryptocurrencies and using dollar deposits and reserves to protect “stable currencies” without first informing their bank managers of their intentions. this activity.

Supervisors will then review the bank’s risk management tools and systems, and allow the activity only if they demonstrate that the bank can do so in a safe and robust manner.

A joint statement issued by the Federal Reserve, the Federal Deposit Insurance Corporation and the OCC on Tuesday said bank regulators want to clarify in 2022 what role traditional banks can legally play in the cryptocurrency market.