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The OCC is Facing Calls to Pull Guidance That Allows Banks to Do Some Crypto Business

Protocol | Brian Deffenbaugh | Aug 11, 2022

Financial Banks and crypto - The OCC is Facing Calls to Pull Guidance That Allows Banks to Do Some Crypto BusinessA group of progressive senators including Elizabeth Warren and Bernie Sanders are calling on a federal banking regulator to pull Trump-era guidance that gives banks limited clearance to engage in crypto-related business.

In a Wednesday letter addressed to the Office of the Comptroller of the Currency, the senators pushed forward an ongoing debate over the role banks should play in the crypto ecosystem. Banking industry groups say the regulated institutions can bring stability to the volatile sector. But the lawmakers fear crypto could introduce systemic risk to the broader banking system without strict guardrails.

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The OCC's current guidance was published in late 2020 and early 2021. It gives federally chartered banks clearance to provide crypto custody service, hold cash reserves backing stablecoins and use blockchain technology and stablecoins to verify bank-to-bank payments.

Inaction vs. limitation

A banking industry trade group recently argued that limiting banks’ participation in crypto is counterproductive to protecting consumers. A Monday letter from the American Bankers Association to the Treasury Department noted banks are facing restrictions that mostly keep them out of digital assets, while there is still little regulation for non-banks involved in crypto.

Brooke Ybarra, senior VP of innovation and strategy, American Bankers Assocation:

The combination of these two approaches — inaction on the one hand to bring into the regulatory perimeter non-bank crypto companies, and limitation on the other of banks’ ability to engage responsibly in the digital asset market — creates an environment that makes it nearly impossible for responsible financial innovation to occur in this space.

Next

The senators’ letter calls on the OCC to take up a new process with the Federal Deposit Insurance Corp. and Federal Reserve to clarify how the banks they oversee can engage with crypto. The letter also includes a series of questions about how many OCC-regulated banks are engaging in crypto activities.

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The OCC, FDIC and Federal Reserve released a joint statement late last year promising further clarity would come for banks on crypto in 2022 — but guidance since then has been limited. The FDIC recently put out a statement warning banks they must monitor how the crypto firms they partner with advertise the availability of deposit insurance. That concern, plus Warren and Sanders’ attention, could be a signal of additional action coming.

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NCFA Jan 2018 resize - The OCC is Facing Calls to Pull Guidance That Allows Banks to Do Some Crypto BusinessThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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