FDIC Chair Says US Regulators are Looking to Allow Banks Hold and Offer Crypto

As cryptocurrencies continue to gain global recognition, US regulators are looking to create a clear roadmap for traditional financial institutions like banks and their clients to become a part of this rapidly growing trillion-dollar industry.

In a recent interview with Reuters, Jelena McWilliams, chair of the Federal Deposit Insurance Corporation (FDIC), said that the regulator is planning to lay a groundwork that will enable banks to engage with crypto assets.

She noted, however, that for its plan to work out, it has to put in place clearer regulations on holding crypto assets, including using them as collateral for bank loans and holding them on their balance sheet the same way that traditional assets are held.

She said,

“I think we need to allow banks in this space, while appropriately managing and mitigating risks.”

McWilliams stated that bringing banks into the crypto space will pave the way for regulators to effectively keep a measure of control over the emerging asset class.

She also pointed out that the easiest part of the task will be creating a roadmap for banks to hold crypto in custody for clients’ trading.

The challenge, however, lies in how to use such highly volatile assets as collateral for bank loans and add them to bank balance sheets.

“The issue there is the valuation of these assets and the fluctuations of their value that can be almost on a daily basis. You have to decide what capital and liquidity treatment to allocate to such balance sheet holdings,” she added.

Banks Need to Be in the Crypto Space

The FDIC chair acknowledged that the crypto industry is developing at a rapid pace and if banks do not join the trend, they will be left behind and regulators will have no control over them.

“If we don’t bring this activity inside the banks, it is going to develop outside of the banks…The federal regulators won’t be able to regulate it, ” she concluded.

Several banks have already started offering bitcoin services to their clients. Earlier this year, America’s oldest bank, BNY Mellon, joined the crypto bandwagon.