State Banks’ Crypto Plans Face Hurdles After New Fed Policy

State Banks’ Crypto Plans Face Hurdles After New Fed Policy

February 6, 2023, Bloomberg Law

Michael Reed was quoted in Bloomberg Law regarding the Federal Reserve's policy statement further limiting crypto-asset activity..

The Fed's policy statement clarified that state banks under its oversight should limit their crypto involvement largely to custody services, and avoid holding crypto as principal or issuing asset-pegged stablecoins, which are a type of blockchain-based cryptocurrency pegged to a traditional currency, gold or other assets.

The Fed said that the issuance of stablecoins is not considered safe and sound banking activities, which would indicate the Fed doesn’t want to see state banks under its oversight to issue them. The Fed also said that it would review banks’ documentation if they get approval from the OCC or the FDIC for stablecoin, or other crypto, activities.

The Fed will review those applications with a skeptical eye, Michael remarked.

“It’s presumptively no until you prove to us yes,” Michael said of the Fed’s position.

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