WASHINGTON—The Federal Deposit Insurance Corporation has flagged concerns about crypto in a letter to banks that also included a request to be notified about any business they are conducting with digital assets.
"FDIC is concerned that crypto assets and crypto-related activities are rapidly evolving, and risks of this area are not well understood given the limited experience with these new activities," the agency said in its letter.
Moreover, the regulator said it wants the institutions it supervises to notify it about their crypto-related activities or about any plans to engage in digital assets. It will use the information to assess the safety and soundness, consumer protection, and financial stability implications of such activities, Business Insider said.
‘Fundamental Ownership Issues’
Under safety and soundness, the FDIC said there are fundamental crypto-ownership issues, including whether it is possible for ownership to be clearly validated and confirmed. "Further, there are significant anti-money laundering/countering the financing of terrorism implications and concerns related to crypto assets," it added.
In terms of financial stability, one risk the agency is raising is a systematic disruption in transactions that could result in a "run" on financial assets that back a crypto asset or crypto-related activity.
The agency also wants to avoid consumer confusion over crypto assets offered by, through, or in connection with insured institutions. Consumers "may not understand the role of the bank or the speculative nature of certain crypto assets as compared to traditional banking products, such as deposit accounts," the FDIC said.
Effort to Unify Oversight
The FDIC's letter arrived as U.S. regulatory agencies are working on unifying oversight of the $2 trillion cryptocurrency market. President Biden in March signed an executive order for further work on developing a national policy on digital currencies, Business Insider noted.