U.S. Bank Regulator Failed to Provide Crypto Guidance to Banks
According to an examination by the regulator’s inspector general, the US Federal Deposit Insurance Corporation (FDIC) does not have a fully established strategy to address risks from cryptocurrency exposure at banks.
The FDIC’s Office of Inspector General (OIG) cited flaws in the agency’s response to growing crypto-related risks in a redacted report released this week.
According to the OIG, while the FDIC has begun formulating remedies, it “has not yet completed a risk assessment to determine whether the Agency can sufficiently address crypto-asset-related risks.” The FDIC was specifically instructed to clearly document its risk assessments, assess their relevance, and implement mitigation techniques such as industry guidelines.
In early 2022, the regulator, which provides deposit insurance to banks, implemented a “bottom-up” crypto risk strategy centered on obtaining information from supervised institutions.
This included sending letters to banks inquiring about their cryptocurrency exposure and providing case-by-case feedback. The report’s sections addressing institution reactions were omitted.
However, the FDIC’s process for following up on the letters, according to the OIG, was imprecise, with no set deadline or endpoint. The FDIC agreed with both of the watchdog’s recommendations to strengthen its crypto risk approach. The FDIC intends to put corrective measures in place by the end of January 2024.
Federal inspectors routinely audit and assess agency policies in order to increase effectiveness and accountability. The findings of the OIG highlight the difficulties that regulators confront in developing comprehensive solutions to quickly evolving crypto threats.
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