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Fintech in Brief: FDIC Solicits Information on Digital Assets

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| Legal Advisory

On May 17, 2021, the Federal Deposit Insurance Corporation (the “FDIC”) issued a Request for Information and Comment (the “RFI”) on Digital Assets. The FDIC is interested in getting input from all interested parties on the banking industry’s current and potential digital activities and digital asset use cases.

The RFI has a broad scope. It is not limited to FDIC-supervised nonmember banks and encompasses the digital activities of all insured depository institutions (“IDIs”) and their affiliates. The RFI’s focus on IDIs and its reference to the FDIC’s permissible activities regulation, 12 C.F.R. Part 362, subpart A (“Part 362”), may indicate that the FDIC is seeking a larger role in the digital assets policy debate. It may also be in response to the Office of the Comptroller of the Currency’s (the “OCC”) recent expansive interpretations of national bank digital authorities.

IDIs are increasingly active in the emerging digital asset ecosystem, acting as custodians, reserve holders, issuers, and exchange or redemption agents, and by performing node functions and holding digital asset issuers’ money deposits. Because of this increased activity, the FDIC is interested in learning about the banking industry’s use of digital assets in financial markets and intermediation, as well as with settlement and payment systems.  

The RFI asks 17 specific questions under five subject headings:

Current and Potential Use. The FDIC seeks more information on the banking industry’s range of existing and planned digital activities, where lies the greatest demand for digital asset services, and who are the largest drivers for such services.

Risk and Compliance Management. The RFI questions whether IDIs’ existing risk and compliance management frameworks are adequate to identify, measure, monitor, and control risks associated with the various digital asset use cases. The questions also explore operational risk issues associated with digital assets integration with legacy technology systems and cybersecurity.

Supervision and Activities. The RFI asks whether additional clarity on supervisory policy is needed with respect to digital asset related activities, and whether Part 362 regulation and application procedures governing certain digital asset activities or investments should be clarified or amended in order to support IDIs considering or engaging in such activities.

Deposit Insurance and Resolution. The RFI asks for comment on potential customer confusion over the status of uninsured digital asset products, insured deposits, and the pass-through deposit insurance status of fiat-backed stablecoins and stored value products where the underlying funds are held by IDIs. The RFI also seeks comment on issues related to valuing, marketing, transferring, operating, or resolving the digital assets in the failed bank resolution process or in receivership.

Additional Considerations. The RFI broadly seeks comments on any other digital asset-related information commenters think should be brought to the FDIC’s attention. It also seeks comments on the digital asset-related activities of uninsured banks and nonbanks.  

The comment period ends on July 16, 2021.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

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