US Federal Reserve Board Prohibits Member Banks from Holding Digital Assets as Principal
February 7, 2023
On February 7, 2023, the U.S. Federal Reserve Board issued a statement “interpreting section 9(13) of the Federal Reserve Act” which provided (1) that the U.S. Federal Reserve Board will presumptively prohibit member banks from holding most digital assets as a principal, and (2) that those “state member bank seeking to issue a dollar token would be required to adhere to all the conditions the OCC has placed on national banks with respect to such activity” and that the “Board generally believes that issuing tokens on open, public, and/or decentralized networks, or similar systems is highly likely to be inconsistent with safe and sound banking practices.”
The statement’s summary provided as follows:
The Board is issuing a policy statement interpreting section 9(13) of the Federal Reserve Act and setting out a rebuttable presumption that it will exercise its discretion under that provision to limit state member banks to engaging as principal in only those activities that are permissible for national banks—in each case, subject to the terms, conditions, and limitations placed on national banks with respect to the activity—unless those activities are permissible for state banks by federal statute or under part 362 of the Federal Deposit Insurance Corporation’s regulations. The policy statement also reiterates to state member banks that legal permissibility is a necessary, but not sufficient, condition to establish that a state member bank may engage in a particular activity. A state member bank must at all times conduct its business and exercise its powers with due regard to safety and soundness. For instance, it should have in place internal controls and information systems that are appropriate and adequate in light of the nature, scope, and risks of its activities. The Supplementary Information section provides examples of how the policy statement would be applied to certain crypto-asset-related activities.
The full Statement can be found here, Statement.
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