Bank's Bitcoin Product Proposal

April 1, 2022

To: XXXXX
RADD Correspondence File

From: XXXXX
Case Manager

Subject: Bank Contact: XXXXX
Proposed New Product: XXXXX

On March 18, 2022, FDIC Deputy Regional Director Serena Owens, FDIC Assistant Regional Director Eric Guyot, and Case Manager XXXXX participated in a Teams call with President and Chief Executive Officer XXXXX and Chief Operations Officer XXXXX (Bank Management). The purpose of the meeting was to discuss correspondence sent to the bank on March 11, 2022, asking the bank to pause all crypto asset-related activity. The following are some brief bullets regarding the discussion.

  • The bank signed a contract in XXXXX with XXXXX and XXXXX with original plans to deploy XXXXX.
  • The product will allow customers to buy, sell, and hold Bitcoin through XXXXX.
  • The Bitcoin will be held in a XXXXX custodian account (risk assessment indicates custodial assets will be property of bank customers, even in bankruptcy).
  • A customer fee of 2% per transaction will be charged for each purchase and each sale.
  • The bank retains XXXXX of the fee.
  • The bank will settle daily with XXXXX and this will not be a sweep-type arrangement.
  • The Bitcoin reportedly will never touch the bank’s balance sheet.
  • No “wallets” will be offered as part of the XXXXX product.
  • The intent is to stay competitive with Fintech companies and other banks.
  • Bank management has performed due diligence.
  • The risk assessment covers credit, liquidity, market, compliance (e.g., BSA/AML), operational, strategic, and reputational risk.
  • Management identified the high and medium risks as compliance, operational, strategic, and reputational.
  • The customer’s online account will show Bitcoin separate from FDIC-insured bank accounts with appropriate consumer disclosures, including that Bitcoin is not FDIC insured.
  • Bank Management stated that as an early adopter they will not pay for any development costs, and that IT integration will only be between the bank’s online banking vendor XXXXX.

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