FDIC Chairman: “We Should Allow Banks to Hold Bitcoin”

FDIC Chair Jelena McWilliams says her goal in an interagency team is to create a way for banks to hold crypto assets.


Rules about banks that want crypto on their balance sheets

Federal Deposit Insurance Corporation (FDIC) chairman Jelena McWilliams, one of the country’s top financial regulators, believes it’s time to allow banks to use cryptocurrency, such as Bitcoin (BTC), for themselves and keep their customers.

“I think we should allow banks to do this while managing and mitigating risks appropriately.” So she said in a interview with Reuters at the Money20/20 conference in Las Vegas.

McWilliams’ comments come as an interagency team. This consists of employees of the FDIC, the Federal Reserve and the Office of the Comptroller of the Currency (OCC). Their job is to coordinate cryptocurrency policies for US banks.

“My goal in this interagency group is to basically provide a pathway for banks to act as custodians of these assets, using crypto assets and digital assets as a form of collateral,” McWilliams said at the event. She indicated that the group will look into rules for holding crypto on their balance sheets. This is something publicly traded companies such as Tesla and Microstrategy are already doing.


Previous rules about banks and crypto

This was previously attempted under Trump-era appointee Brian Brooks. Brooks was previously Coinbase’s Chief Legal Officer. Under Brooks, the OCC issued rules in June 2020 that allow federal banks and savings associations to hold crypto assets on behalf of customers.

“From vaults to digital vaults, we need to ensure that banks today can meet the financial services needs of their customers.” This is what Brooks said when issuing a letter interpreting the agency’s rules. “This advisory clarifies that banks can continue to meet the needs of their customers to protect their most valuable assets, including cryptocurrency for tens of millions of Americans today.”

But those rules were suspended by the current acting comptroller, Michael Hsu, who took over in April.

“My wider concern is that these initiatives have not been implemented in full coordination with all stakeholders,” Hsu wrote to the House Committee on Financial Services in May when he proposed a policy review. “They also do not appear to have been part of a broader strategy regarding the regulatory perimeter.”

McWilliams’ comments come today on the heels of a politicalreport last week. OCC staff are said to have been “quietly determined” after Trump’s defeat in the polls that banks could trade crypto for their customers. The step was according to Politico approved by the buearu’s chief attorney’s office. And that decision led Paxos, which is helping to facilitate PayPal’s crypto offering, to receive a preliminary banking charter in April.

More traditional banks don’t necessarily wait for approval. US Bancorp, the country’s fifth largest bank by holdings, said this month it was preparing a cryptocurrency custodial service for investment managers at institutions.

But security for banks could open the floodgates. However, further delay can have the same effect. McWilliams said:

“If we don’t bring this activity inside the banks, it will develop outside the banks.”

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