Over the last several years, professionals at Forvis Mazars have seen regulatory agencies increase their focus on changing technologies and what risks they represent for financial institutions. This has included perceived risks around certain crypto-related activities. In general, agencies have taken a fairly conservative approach in trying to find the balance between managing risk without discouraging innovation.
With that in mind, the agencies have worked to provide information regarding crypto-related activities for financial institutions through various interpretive letters and supervisory guidance. One of the biggest moves was the requirement for financial institutions to notify their supervisory agency when wanting to provide certain services related to crypto assets as reflected in the following releases:
- Federal Reserve: Supervisory Nonobjection Process for State Member Banks Seeking to Engage in Certain Activities Involving Dollar Tokens
- Federal Reserve: Engagement in Crypto-Asset-Related Activities by Federal Reserve Supervised Banking Organizations
- FDIC: Notification of Engaging in Crypto-Related Activities
- Office of the Comptroller of the Currency (OCC): Chief Counsel’s Interpretation Clarifying: (1) Authority of a Bank to Engage in Certain Cryptocurrency Activities; and (2) Authority of the OCC to Charter a National Trust Bank
With the change in administration, a significant move has been to rescind all of the above guidance to eliminate previously established notification requirements through a joint announcement in April 2025. Separately, the OCC issued Interpretive Letter 1183 (March 2025) and Letter 1184 (May 2025) addressing these changes.
Where Does That Leave Us?
Although the requirements initially established through the rescinded items no longer apply, the agencies have made it clear that the expectation for institutions to effectively manage risk remains high. In addition, they have stated their intent to provide updated guidance, as emphasized in the recent notifications.
FDIC
In contrast to FIL-16-2022, which established a prior notification requirement specific to crypto-related activities, this Financial Institution Letter (FIL) clarifies that “FDIC-supervised institutions may engage in permissible crypto-related activities without receiving prior FDIC approval. As with all other activities, FDIC-supervised institutions should consider the associated risks—including, but not limited to, market and liquidity risk; operational and cybersecurity risks; consumer protection requirements; and anti-money laundering requirements—and should engage with their supervisory team as appropriate.”
The FDIC will also work with the other banking agencies to replace interagency documents issued in January 2023 and February 2023 related to crypto assets with further guidance or regulations.
The FDIC also details expectations as part of the 2024 Risk Review, where it states:
“Some of the challenges banks may face in assessing these risks arise from the dynamic nature of crypto-assets, the crypto marketplace, and the rapid pace of innovation. Key risks associated with crypto-assets and crypto-asset sector participants include those related to fraud, legal uncertainties, misleading or inaccurate representations and disclosures, risk management practices exhibiting a lack of maturity and robustness, and platform and other operational vulnerabilities.”
OCC
The OCC said it “will examine the activities described in Interpretive Letters 1170, 1172, and 1174 as part of its ongoing supervisory process. As with any activity, banks must conduct all crypto-asset activities in a safe, sound, and fair manner and in compliance with applicable law. New activities should be developed and implemented consistent with sound risk management practices and align with banks’ overall business plans and strategies.”
It should be noted that the rescinded guidance included discussion and explanations of the different crypto models, the different ways that institutions might engage in the crypto space, and the various risks institutions should consider related to the type of activities they might engage in. These include entering into relationships with third parties engaged in the crypto space. In other words, until the agencies provide updates, the information included in previous guidance remains a valuable resource in understanding the different crypto structures and risks associated with various crypto activities.
Although this article has not specifically mentioned the National Credit Union Administration, it has established a landing page for Financial Technology and Digital Assets with additional information for credit unions.
There have been no changes in the expectations by the Financial Crimes Enforcement Network (FinCEN) regarding convertible virtual currency as noted in the 2019 Guidance, “Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies”:
“The term ‘virtual currency’ refers to a medium of exchange that can operate like currency but does not have all the attributes of ‘real’ currency, as defined in 31 CFR § 1010.100(m), including legal tender status. CVC is a type of virtual currency that either has an equivalent value as currency, or acts as a substitute for currency, and is therefore a type of ‘value that substitutes for currency.’ As mentioned above, the label applied to any particular type of CVC (such as ‘digital currency,’ ‘cryptocurrency,’ ‘cryptoasset,’ ‘digital asset,’ etc.) is not dispositive of its regulatory treatment under the BSA. Similarly, as money transmission involves the acceptance and transmission of value that substitutes for currency by any means, transactions denominated in CVC will be subject to FinCEN regulations regardless of whether the CVC is represented by a physical or digital token, whether the type of ledger used to record the transactions is centralized or distributed, or the type of technology utilized for the transmission of value.”
There are also efforts within Congress to regulate certain aspects through the GENIUS Act with a primary focus on stablecoin (passed through the Senate and subject to House approval at the time this article was written) and several other pieces of legislation regarding crypto activities expected in the future.
If you have any questions or need assistance, please reach out to a professional at Forvis Mazars.