Intersections: banking, fintech, and crypto.

Crypto Making Inroads – Technology development in the fintech and crypto space, which has been accelerating since the start of the COVID pandemic, pushes the limits of banking and securities regulations. Currently, non-state issued digital assets exceed $3 trillion. Eleven nations have already launched central bank digital currencies (CBDCs), with another 14 considering pilot programs, 26 in development phase, and 47 (including the US) in the research phase. Governments and regulators have scrambled to keep up with the changes, but have gained their footing in the last year as more policy directives and regulations have been forthcoming globally.

Biden’s Executive Order

In March 2022, President Biden issued an Executive Order that acknowledged that advances in digital and distributed ledger technology for financial services have led to dramatic growth in markets for digital assets, with profound implications for the protection of consumers, investors, and businesses, including in the areas of data privacy and security; financial stability and systemic risk; crime; national security; the ability to exercise human rights; financial inclusion and equity; and energy demand and climate change.” The Order outlined the first ever whole-of-government approach to addressing the risks, and harnessing the potential benefits, of digital assets and their underlying technology. The Order lays out a national policy for digital assets across six key priorities: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation. Some of the specific directives include exploring a US CBDC, mitigating the risk of illicit finance and the national security risks posed by illicit use of digital assets, addressing the need for equitable access to financial services as digital asset innovation develops, and supporting technological advances in the responsible development, design, and implementation of digital asset systems while prioritising privacy, security, combating illicit exploitation, and reducing negative climate impacts. Lofty goals, but it falls upon the regulators to address issues on a granular basis.

Recent regulatory action

Recently the FDIC (Federal Deposit Insurance Company), the OCC (Office of the Comptroller of the Currency), and the Federal Reserve Board (FRB) have issued various guidance pertaining to the banking sector.


The OCC had been addressing issues related to cryptocurrencies since 2020. Its November 2021 Interpretive Letter #1179 confirmed that it is legally permissible for a bank to provide cryptocurrency custody services, hold dollar deposits serving as reserves-backing stablecoin in certain circumstances, act as nodes on an independent node verification network (i.e., distributed ledger) to verify customer payments, and engage in certain stablecoin activities to facilitate payment transactions on a distributed ledger, provided that the bank can demonstrate, to the satisfaction of its supervisory office, that it has controls in place to conduct the activity in a safe and sound manner. The bank need not obtain a formal supervisory non-objection.

“President Biden’s Executive Order outlined the first ever whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets .”


The FDIC, on April 7, 2022, issued a Financial Institution Letter (FIL) related to crypto activities, similar to the OCC’s aforementioned interpretive letter, specifying that an FDIC-supervised institution that engages, or intends to engage in, any crypto-related activities should notify the FDIC and provide any information requested by the FDIC that will allow the agency to assess the safety and soundness, consumer protection, and financial stability implications of such activities.” The FDIC further defined “crypto asset” to mean “any digital asset implemented using cryptographic techniques.” The term “crypto-related activities” for the purposes of this FIL includes acting as crypto-asset custodians; maintaining stablecoin reserves; issuing crypto and other digital assets; acting as market makers or exchange or redemption agents; participating in blockchain and distributed ledger-based settlement or payment systems, including performing node functions; as well as related activities such as finder activities and lending.” However, the FDIC noted further that the inclusion of an activity within this listing should not be interpreted to mean that the activity is permissible for FDIC-supervised institutions.”


In August the FRB issued two sets of guidelines regarding the criteria for an institution to access Federal Reserve Board accounts, and addressing crypto-assets.

FRB Account access. On August 15, 2022 the FRB’s guidelines on account access acknowledged that the payments landscape is evolving rapidly as technological progress and other factors are leading to both the introduction of new financial products and services and to different ways of providing traditional banking services (i.e., payments, deposit-taking, and lending). In recognition of the uptick in novel charter types being authorised or considered across the country and an increasing number of inquiries and requests for access to accounts and services from novel institutions, the FRB laid out a plan for a more transparent and consistent approach to such requests. It adopted a three-tier framework for the review process for different types of institutions.

  • Tier 1 review would generally be less intensive and more streamlined, only available to eligible institutions that are federally insured.
  • Tier 2 review would generally be an intermediate level of review. It would apply to eligible institutions that are not federally insured but (i) are subject (by statute) to prudential supervision by a federal banking agency, and (ii) any holding company subject to Federal Reserve oversight (by statute or by commitments).
  • Tier 3 review would generally be the strictest level of review. Tier 3 institutions consist of eligible institutions that are not federally insured and not subject to prudential supervision by a federal banking agency at the institution or holding company level.

Crypto assets. On August 16, 2022, the FRB issued a Supervisory Letter providing guidance regarding engagement in crypto-asset-related activities by Federal Reserve-Supervised Banking Organizations. Consistent with the approach taken by the FDIC and the OCC, the FRB will also require FRBsupervised organisations to “notify its lead supervisory point of contact at the Federal Reserve prior to engaging in any crypto-asset-related activity.”

In conclusion, we are beginning to see a coalescing and consistency around regulatory action that attempts to put safeguards around banking services in connection with crypto assets without stifling innovation.