Questions about bank cryptocurrency related services
On the 17th, the Federal Deposit Insurance Corporation (FDIC) began soliciting opinions from deposit handling organizations regarding the handling of digital assets such as crypto assets (virtual currency). It mainly inquires about “current and future cases of handling digital assets” in a free-answer format.
The FDIC is a government agency that insures US bank deposits in case of bankruptcy. This insurance is required for deposit handling institutions (banks, etc.) to operate in the United States. In October 2019, there is a case where the guarantee of US dollar deposits of customers of the virtual currency exchange Binance US started.
Relation:US Binance Customers’ US Dollar Deposits Covered by Federal Deposit Insurance Corporation (FDIC)
In addition, the background of the notification of solicitation of opinions was explained as follows.
In the new digital asset ecosystem, banks are exploring roles such as custodians, reserve holders, token issuers, token trading and redemption agents, performing node functions, and holding deposits for digital asset issuers. I’m here.
In addition to these, banks and others may handle market making (making transactions easier) and DeFi (decentralized finance). With CNBC recently reporting that it may be possible to offer Bitcoin (BTC) trading services in bank accounts in the near future, expectations for banks to handle cryptocurrencies are rising.
Relation: Bank Bitcoin Trading Service Will Realize By the End of the Year in the US = CNBC
Handling cases and risk management
The questions from the FDIC are wide-ranging, but for example:
- What are any digital asset-related activities or use cases that you are currently working on or considering? (Example: Custody, services related to virtual currencies held by companies in the form of balance sheets, activities related to facilitating internal operations)
- What are the specific risks that are difficult to measure, monitor and manage for digital asset use cases? What management functions and processes have been implemented or will be implemented to address such risks?
- Are there areas where the FDIC should clarify or expand existing supervisory guidelines to address digital asset activity?
There are also questions about deposit insurance and resolution. The focus was mainly on what can be considered as an example of handling digital assets such as virtual currencies, and related risks and risk management methods.
In November 2020, the FDIC is looking for a lawyer with expertise in the fields of financial technology and blockchain. The role of this “fintech advisor” was to “provide the FDIC with advice and assistance related to legal issues arising from new digital and other technologies.”
Applicants’ specialty areas include blockchain payment systems, decentralized ledger development, smart contracts, etc., and FDIC has recently been in full swing on how to handle virtual currency, which is a new asset. It seems that they are considering it.
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“Cryptocurrency” means “cryptographic assets”