Clarifying stablecoin regulation: FDIC outlines key points for banks' crypto business
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Clarifying stablecoin regulation: FDIC outlines key points for banks' crypto business
The FDIC believes that a complete ban on public blockchains would be too stringent.
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Translation: Blockchain Knight
The U.S. Federal Deposit Insurance Corporation (FDIC) is developing a more permissive and transparent framework for U.S. banks engaging in crypto asset activities, including the use of public, permissionless blockchains.
On April 8, FDIC Acting Chairman Travis Hill delivered remarks at the American Bankers Association Washington Summit, outlining the agency’s evolving stance on crypto-related activities.
Guidance on Interacting with Public Blockchains
One key area under review involves regulated banks’ interactions with public, permissionless blockchains.
Hill acknowledged that while jurisdictions outside the United States have allowed banks to use public chains for years, U.S. banking regulators have taken a more cautious approach.
The FDIC now believes that an outright ban on the use of public blockchains is overly restrictive. However, Hill emphasized the need for appropriate safeguards to govern such activities.
The agency is evaluating existing interagency guidance, including joint statements issued in January and February 2023, to establish durable standards for the responsible use of public networks.
The possibility of public blockchains operating in a permissioned manner is also being considered. Hill stated that regulators must assess how to define and oversee blockchain configurations that blur the lines between open and permissioned environments.
FDIC to Issue Further Guidance
The FDIC said it intends to issue additional guidance tailored to specific digital asset use cases.
Hill noted that the agency will continue assessing outstanding issues related to the scope of crypto-related activities, regulatory treatment of blockchain-based products, and risk management expectations for banks operating in this space.
The broader goal is to build a consistent and transparent regulatory framework that promotes innovation while ensuring adherence to safety and soundness standards.
Hill recently indicated that the agency’s revised guidance represents a fundamental shift in how the U.S. banking system approaches crypto assets and blockchain technology.
He emphasized that the FDIC has withdrawn its previous requirement for regulated institutions to notify the agency before engaging in digital asset and blockchain activities.
Stablecoin Regulation and Deposit Insurance Framework
Hill also addressed emerging issues surrounding stablecoins, particularly legislative developments proposed by Congress.
The FDIC is reviewing potential updates to pass-through deposit insurance regulations to clarify eligibility criteria for deposits holding stablecoin reserves. Key issues under evaluation include liquidity risk management, safeguards against illicit finance, and cybersecurity standards.
In 2020 and 2021, the Office of the Comptroller of the Currency (OCC) determined that national banks could offer several crypto-related services, such as custodizing and issuing stablecoins, participating as blockchain validators, and accepting deposits tied to stablecoins.
The FDIC is now considering whether to further clarify the boundaries of permissible activities in this domain or expand regulatory guidance to cover additional use cases.
Tokenized Deposits and Smart Contract Risks
The remarks also highlighted the need for clearer regulatory treatment of tokenized real-world assets and liabilities, including tokenized commercial bank deposits. Hill stated that the FDIC views “a deposit as a deposit, regardless of the technology or method used to record it.”
However, he expressed concern about whether counterparties could use smart contracts to withdraw funds at par value following a bank failure, which could increase resolution costs if safeguards are not in place to prevent such outflows.
This concern is driving internal FDIC efforts to evaluate technical solutions to prevent unintended fund withdrawals during bank resolution scenarios.
Hill pointed out that the challenge lies in aligning on-chain programmability with traditional regulatory safeguards designed to ensure the orderly resolution of failed institutions.
These moves by the FDIC mark an official step toward providing regulatory clarity for banks exploring digital asset infrastructure, while underscoring the need for prudent risk controls and further clarification of permitted activities.
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