FDIC Requests Info on Crypto Platform

FDIC
Federal Deposit Insurance Corporation
New York Regional Office
350 Fifth Avenue, Suite 1200, New York, New York 10118

December 2, 2021

Board of Directors
XXXXX

Subject: XXXXX

Dear Board Members:

We understand that XXXXX plans to begin testing of the new digital payments platform, XXXXX, on XXXXX. We have reviewed materials provided by the Bank for the XXXXX and XXXXX conference calls during which the program was discussed. Based on our review of these materials and the information provided during the conference calls, we request that you provide us with the following information:

  • Any due diligence, analysis or opinions, whether prepared by XXXXX or its outside counsel, a consultant or other third party, regarding:
  • Whether the XXXXX and all contemplated usages are “activit[ies] permissible for a national bank” for purposes of Part 362 of the FDIC Rules and Regulations, 12 C.F.R. Part 362;
  • Whether XXXXX and all contemplated usages are permissible under applicable XXXXX statutes and regulations;
  • XXXXX position that XXXXX is not a stablecoin;
  • XXXXX statement during the XXXXX presentation that XXXXX would not be considered a security for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934. Has this position been confirmed with the Securities and Exchange Commission?;
  • Whether XXXXX or any related activities would be subject in any way to the jurisdiction of the Commodity Futures Trading Commission;
  • XXXXX position that FDIC deposit insurance would be available to qualifying commercial Bank client owners XXXXX;
  • Whether XXXXX are virtual currencies as contemplated by Internal Revenue Service (IRS) Notice 2014-21 and what, if any, IRS reporting requirements would XXXXX.

  • the Bank have in connection with the XXXXX and with respect to any transactions involving them; o XXXXX its operators and senior management; o The ability to overlay the safeguards discussed in the XXXXX and presentation on the XXXXX associated transaction restrictions, and monitoring, e.g., the Bank’s BSA/AML/OFAC transaction monitoring; o The ability of XXXXX BSA/AML/OFAC transaction monitoring systems to effectively monitor XXXXX transactions; o cybersecurity protocols, risks, incident remediation procedures, and the relative responsibilities of XXXXX and third party service providers; o XXXXX third party vendor due diligence and oversight process, and the effectiveness of XXXXX oversight over third party vendors; and o The XXXXX and any third parties providing services in connection with the XXXXX.

  • All agreements, disclosures, and representations that will be provided to or made by XXXXX, including: o any application, user agreement and/or any user terms and conditions associated with becoming an XXXXX; o any disclosures regarding XXXXX; o any disclosures related to private keys; o any disclosures regarding token functionalities, including wallet freezes/locks and asset claw-backs; o concerning cybersecurity protocols, risks, incident remediation procedures, and the relative responsibilities of XXXXX, and any third service providers; o disclosures regarding the privacy and/or sharing of personal information of XXXXX; o disclosures regarding the availability of FDIC Deposit Insurance coverage to XXXXX; o disclosures regarding funds availability related to XXXXX; o any applicable schedule of fees or other charges, whether by XXXXX the XXXXX or any other XXXXX service provider; and o any agreement and/or terms and conditions applicable to the XXXXX omnibus escrow account.

  • Any agreements between the XXXXX and the XXXXX XXXXX, the XXXXX, and any entity or individual working for or affiliated with XXXXX or the XXXXX or otherwise involved or associated in any way with XXXXX.

  • Any agreements, or any amendments to agreements, between the XXXXX and any other entity or individual involved in any way with XXXXX.

  • Any agreements or arrangement between XXXXX and the XXXXX XXXXX.

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  • Any XXXXX policies and procedures governing or related to the XXXXX including, without limitation:
  • concerning the creation and burning of XXXXX as XXXXX funds are transferred in or out of XXXXX including, without limitation, in instances when private keys are lost or rendered inoperable;
  • concerning the use of XXXXX deposits by XXXXX including, without limitation, any earmarking of the assets acquired to the XXXXX deposits employed; the permissible uses of the XXXXX deposits, whether for investment or other purposes; and any differences from XXXXX use of non-XXXXX deposits and XXXXX deposits; and
  • concerning internal audit or reconciliation procedures between XXXXX records and the XXXXX.

In light of the XXXXX imminent testing, it would be helpful to have the requested materials as soon as possible, but in no event later than January 3, 2022. Please include the XXXXX in the distribution of requested information. Should you have any questions regarding this request please contact Senior Case Manager XXXXX at XXXXX, or Counsel XXXXX at XXXXX.

Sincerely,

Steven P. Slovinski
Assistant Regional Director

cc: XXXXX

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