FDIC opens crypto banking with revised blockchain policies

The Federal Deposit Insurance Corporation (FDIC) has announced a major policy shift to support banks engaging in crypto-related activities, signaling increased openness to blockchain innovation.

Acting Chairman Travis Hill outlined the new approach during his address at the American Bankers Association’s Washington Summit on April 8, emphasising regulatory clarity and reduced barriers for banks exploring digital assets.

Hill confirmed that FDIC-supervised institutions can now engage in permissible crypto-related activities without prior FDIC approval.

“Permissible crypto-related activities will generally be treated just like other permissible activities,” Hill stated, highlighting the agency’s commitment to fostering innovation under clear oversight.

The FDIC also plans to revisit its 2023 interagency guidance and develop durable standards for banks using public blockchains responsibly.

Hill questioned whether regulators should proactively define permissible crypto services, referencing custody services, stablecoin reserves, and validator node operations as areas needing clarity.

“While a complete prohibition on interacting with public chains is clearly too restrictive, what guardrails would be prudent?” he asked.

The agency is also addressing stablecoin legislation progressing through Congress, focusing on liquidity risk, cybersecurity, and compliance for tokenised deposits.

Hill proposed reevaluating pass-through deposit insurance regulations to clarify the treatment of stablecoin reserves.

“From the FDIC’s perspective, we should provide certainty that ‘deposits are deposits, regardless of the technology or recordkeeping deployed,’” Hill said.

He warned that smart contracts enabling fund withdrawals after a bank’s failure could increase resolution costs significantly.

Hill concluded by reaffirming the FDIC’s commitment to balancing safety and soundness with responsible digital asset innovation.