On January 27, the US Federal Reserve Board indicated that it would issue a policy statement about bank restrictions. By giving all state banks, including those regulated by the Office of the Comptroller of the Currency (OCC) and those without deposit insurance, the same range of permitted activities, the policy aims to level the playing field and reduce regulatory arbitrage.
By prohibiting state banks from engaging in operations that national banks are not allowed to unless state law permits it, the new policy will restrict the activities of state banks. The statement directly and extensively mentions crypto in the Federal Register notice.
The Board has not identified any authority permitting national banks to hold most crypto-assets […] As principal in any amount, and there is no federal statute or rule expressly permitting state banks to hold crypto-assets as principal. Therefore, the Board would presumptively prohibit state member banks from engaging in such activity under section 9(13) of the [Federal Reserve] Act.
Additionally, it was noted in the notice that state banks had expressed interest in issuing “dollar tokens,” or stablecoins. As a result, they would also be subject to the same OCC interpretive letters as national banks (interpretative letters 1174 and 1179).
The Board generally thinks that releasing coins on open, public, and/or decentralized networks or comparable systems is likely incompatible with secure banking procedures.
The announcement was made the same day that the Federal Reserve denied Wyoming’s Custodia Bank’s application to join the Federal Reserve System.
In August 2022, the Fed issued a letter requiring the banks it supervises to disclose plans that include cryptocurrency and a reminder to ensure adequate risk management. This increased scrutiny of banks engaging in cryptocurrency activities. Banks already involved in cryptocurrency were covered by the letter immediately.