Skip to content

Bitcoin Finder Service Guidelines

Board of Directors

XXXXX
XXXXX

Subject: Bank Acting as a Finder for Bitcoin Service

Dear Members of the Board:

We have reviewed the recent correspondence from President XXXXX regarding the bank’s plan to enter into an agreement with XXXXX and other related entities. We have also reviewed management’s risk assessment and held a brief discussion with President XXXXX regarding this proposal.

The agreement, in short, allows bank customers to purchase or sell Bitcoin through XXXXX. Bitcoin can only be purchased with or redeemed for cash which would flow through the customer’s account with the bank. As presented, the bank has no direct exposure to Bitcoin, and the impact to the bank’s financial statements is limited to some initial expenses, periodic fee income, and the flow of cash to and from XXXXX as customers initiate transactions. Management planned to launch this service on February 1, 2022.

On November 23, 2021, the FDIC, the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency issued the Joint Statement on Crypto-Asset Policy Sprint Initiative and Next Steps (Joint Statement). A copy of the Joint Statement is attached to this letter. According to the Joint Statement, the federal agencies recognize the need for regulatory clarity on a number of crypto-asset related issues. Throughout 2022, the federal agencies plan to provide clarity on whether certain crypto-asset activities are legally permissible, and expectations for safety and soundness, consumer protection, and compliance with existing laws and regulations.

The XXXXX is also evaluating the role of state financial institutions in the crypto-asset space in order to determine the appropriate regulatory balance. In that respect, XXXXX and the federal regulatory agencies continue to review the permissibility of this service. Depending on the outcome of that review, the bank may need to be prepared to file appropriate notice or application to XXXXX and/or an application under Part 362 of the FDIC Rules and Regulations to continue the service.

Until more formal regulatory clarity is available, the Board should ensure that commitments to the XXXXX program are flexible and allow for changes to address legal or regulatory concerns that may arise over time. Generally, we encourage the Board to closely monitor the various risks involved with this proposal, particularly third-party risks and reputational risks. At a minimum, customer disclosures and information should clearly indicate that the XXXXX service and Bitcoin are not FDIC

Finder for Bitcoin Service Page 2

insured. Additionally, such disclosures should note that virtual currency activity is not regulated by the XXXXX.

The Board should ensure periodic monitoring of the XXXXX relationship, including XXXXX financial condition. While the internal risk assessment anticipates a favorable impact on the bank’s reputation from this product, volatility in Bitcoin value or operational issues of XXXXX could lead to customer losses and impact the bank’s reputation. Information technology, information security controls, and Bank Secrecy Act functions should also be updated to address this new service. In addition, the Board should develop exit strategies since it could take time to unwind this activity if deemed necessary.

We will further review this service at the next examination. If you have any questions, please contact FDIC Case Manager XXXXX, or XXXXX. Any FDIC correspondence should be addressed to Kristie K. Elmquist, Regional Director, FDIC, Dallas Regional Office, and sent as a PDF document through the FDIC’s Secure Email portal (https://securemail.fdic.gov/) using the following e-mail address: XXXXX@FDIC.gov. Information about how to use secure email and FAQs about the service can be found at https://www.fdic.gov/securemail/. Correspondence to the XXXXX should be sent to Commissioner XXXXX at the above address or may be emailed to XXXXX.

Sincerely,

Cynthia Scott
Assistant Regional Director
Dallas Regional Office
Federal Deposit Insurance Corporation

Attachments:

Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency

November 23, 2021

Joint Statement on Crypto-Asset Policy Sprint Initiative and Next Steps

The Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency (collectively, agencies) recognize that the emerging crypto-asset sector presents potential opportunities and risks for banking organizations, their customers, and the overall financial system. As supervised institutions seek to engage in crypto-asset-related activities, it is important that the agencies provide coordinated and timely clarity where appropriate to promote safety and soundness, consumer protection, and compliance with applicable laws and regulations, including anti-money laundering and illicit finance statutes and rules.

To that end, the agencies recently conducted a series of interagency “policy sprints” focused on crypto-assets. Similar to a “tech sprint” model, agency staff with various backgrounds and relevant subject matter expertise conducted preliminary analysis on various issues regarding crypto-assets. This joint statement summarizes the work undertaken during the policy sprints and provides a roadmap of future planned work.

Agency staff focused on quickly advancing and building on the agencies’ combined knowledge and understanding related to banking organizations’ potential involvement in crypto-asset-related activities. The focus of the sprint work included:

  • Developing a commonly understood vocabulary using consistent terms regarding the use of crypto-assets by banking organizations.
  • Identifying and assessing key risks, including those related to safety and soundness, consumer protection, and compliance, and considering legal permissibility related to potential crypto-asset activities conducted by banking organizations.
  • Analyzing the applicability of existing regulations and guidance and identifying areas that may benefit from additional clarification.

To place the sprint work in context, staff reviewed and analyzed a number of crypto-asset activities in which banking organizations may be interested in engaging including:

  • Crypto-asset custody.
  • Facilitation of customer purchases and sales of crypto-assets.
  • Loans collateralized by crypto-assets.
  • Activities involving payments, including stablecoins.

1 By “crypto-asset,” the agencies refer generally to any digital asset implemented using cryptographic techniques.
2 To assist in identifying key risks, agency staff reviewed comment letters submitted in response to the FDIC’s Request for Information on Digital Assets.

  • Activities that may result in the holding of crypto-assets on a banking organization’s balance sheet.

Based on this preliminary and foundational staff-level work, the agencies have identified a number of areas where additional public clarity is warranted. As a result, the agencies have developed a crypto-asset roadmap that is summarized below.

Throughout 2022, the agencies plan to provide greater clarity on whether certain activities related to crypto-assets conducted by banking organizations are legally permissible, and expectations for safety and soundness, consumer protection, and compliance with existing laws and regulations related to:

  • Crypto-asset safekeeping and traditional custody services.³
  • Ancillary custody services.⁴
  • Facilitation of customer purchases and sales of crypto-assets.
  • Loans collateralized by crypto-assets.
  • Issuance and distribution of stablecoins.
  • Activities involving the holding of crypto-assets on balance sheet.

The agencies also will evaluate the application of bank capital and liquidity standards to crypto-assets for activities involving U.S. banking organizations and will continue to engage with the Basel Committee on Banking Supervision on its consultative process in this area.

The agencies continue to monitor developments in crypto-assets and may address other issues as the market evolves. Further, the agencies will continue to engage and collaborate with other relevant authorities, as appropriate, on issues arising from activities involving crypto-assets.

³ Traditional custody services in this context include facilitating the customer’s exchange of crypto-assets and fiat currency, transaction settlement, trade execution, recordkeeping, valuation, tax services, and reporting.
⁴ Ancillary custody services could potentially include staking, facilitating crypto-asset lending, and distributed ledger technology governance services. The agencies may seek additional information on these activities through a request for information, prior to providing any further clarity on these activities.

2