Yesterday the Federal Deposit Insurance Corporation (FDIC) published its 2023 Risk Review that dedicated two pages to crypto-asset related risks. The report did not mention the failure of Signature Bank in the crypto-asset section, despite some attributing its failure to crypto exposures, while others reject that as a primary cause.
The FDIC also included a sentence stating, “banking organizations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation.” Identical wording was included in a Federal Reserve announcement last week, following allegations by the crypto community that there’s a policy to de-bank the sector.
While most of the two pages in the FDIC paper focused on bank involvement in crypto, it also mentions participation in broader DLT-based settlement systems or payment systems. The reference is mainly related to a request for banks to notify the regulator if they participate. Regulators are retarding or blocking the adoption of DLT-based payment systems such as Tassat’s Digital Interbank Network and the USDF Consortium.
Beyond banks, several times during the past year the FDIC has had to issue warnings to crypto companies regarding any claims about deposit insurance. FTX was one of the recipients last August.
Overall the report highlights the risks associated with crypto-assets including fraud, weak risk management, operational vulnerabilities and contagion risk. The FDIC says it will issue additional statements about banks engaging in the sector.