The Fed and the White House are working to mitigate crypto risks in the financial system

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The Federal Reserve and the White House provided insight into how they are working to mitigate cryptocurrency risks in the financial system with several releases on Friday. The Fed released a policy statement to promote a level playing field and announced it was refusing custodian banks’ application to join the Federal Reserve, while the White House released a risk roadmap cryptographic.

The White House’s roadmap for mitigating cryptocurrency risk has the potential to impact a wide range of entities that offer or plan to offer digital asset-related products. He orders that the legislation not give the green light to traditional institutions, like pension funds, to dive headlong into the cryptocurrency markets. The statement also suggests that Congress could act to strengthen transparency and disclosure requirements for cryptocurrency companies so investors can make more informed decisions about financial and environmental risks.

Additionally, the Biden administration is expected to release priorities for digital asset research and development soon. While NAFCU supports a clear regulatory framework for cryptocurrency and other financial technologies, the association has always opposed the creation of a central bank digital currency, arguing that the costs outweigh the benefits. benefits and that credit unions represent a superior and safer alternative to advancing financial inclusion goals. and promote affordable access to payments. The association has raised its concerns with the Fed, Treasury, Commerce Department and Congress.

The Fed’s policy statement applies primarily to banks as it relates to Section 9(13) of the Federal Reserve Act, which gives the Fed the power to prohibit or otherwise restrict member state banks and their affiliates from engaging as a principal in any activity that is not authorized. for a national bank, unless the activity is authorized for state banks under federal law.

In denying Custodias a Wyoming-licensed special purpose depository institution that specializes in crypto business and does not have a federal deposit insurance application, the Fed noted that the risk management framework of banks was insufficient to address concerns about heightened risks associated with its proposed crypto businesses, including its ability to mitigate money laundering and terrorist financing risks.

As the Fed strives to transparently assess the risks posed by new institutions seeking access to the Fed account, NAFCU provided comments seeking further clarification on how the proposed guidelines for the assessment Reserve bank account applications would apply to entities designated as low risk in the tiered framework.

NAFCU will continue to advocate for appropriate safeguards for digital assets to ensure responsible innovation takes place within a safe and sound regulatory perimeter where consumer protection applies equally to all institutions. NAFCU will also advocate for regulatory clarity to ensure that credit unions can innovate responsibly on an equal footing with other institutions. NAFCU supports a level playing field for credit unions and other financial institutions where success is not determined solely by regulatory arbitrage.

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