FDIC Letter on Crypto Banking Inquiry

August 17, 2022

Via Electronic Mail

XXXXX

Subject: Determination of Financial Institution Letter (FIL) 16-2022 Applicability

Dear XXXXX,

Thank you for contacting us regarding a prospective banking relationship with crypto-asset exchange company, XXXXX. If management intends to further pursue the activities discussed with Case Manager XXXXX on June 21, 2022, please provide the FDIC with a formal notification as requested in Financial Institution Letter (FIL) 16-2022.

In anticipation of such notification, we request that management provide the following information as part of the notification:

  • Describe how the proposed relationship fits into the bank’s strategic plan. Provide any change in the bank’s strategy as a result of the contemplated relationship, including liquidity and capital management plans, contingency plans, and stress testing and/or scenario analyses.
  • If management anticipates entering into legal contracts with XXXXX, please provide the draft contract(s).
  • If XXXXX plans to provide customers with disclosures related to the bank holding of funds, please provide the disclosure (or draft, if it has not been finalized).
  • Provide more details regarding the anticipated structure and functionality of the proposed omnibus for-benefit-of (FBO) account, including the rationale for the three account structure mentioned on the June 21, 2021 call with Case Manager XXXXX.
  • Provide the anticipated titling on the account signature card.
  • Describe whether subledgers reflecting balances and transaction of underlying end-users will be maintained, which entity will maintain such records, and expertise of such entity in such recordkeeping.
  • Provide the anticipated overall size and daily activity of the proposed FBO account in both dollars and number of XXXXX accounts or wallets.
  • Describe how management may limit the size of the account(s) or raise additional capital if, for example, deposits exceed projections.
  • Describe how management will evaluate the staffing capacity (number and expertise) needed to oversee the proposed depositor relationship.
  • Explain the perceived change in the bank’s Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) profile, including the volume of domestic and/or foreign transactions and planned enhancements to the institution’s AML/CFT infrastructure to handle the volume.
  • Describe the perceived change in information security profile and resulting controls within the technology environment.
  • Explain how XXXXX discloses the limited applicability of federal deposit insurance to U.S. dollar (USD) funds. Indicate who will be responsible for reviewing all public statements, marketing materials, or consumer disclosures that include the bank’s name.
  • Identify who will be responsible for researching and resolving customer disputes covered by Electronic Fund Transfers (Regulation E).
  • Identify who will provide customer support for customer inquiries or complaints involving the XXXXX USD deposit accounts.
  • Describe how the bank will monitor advertisements, marketing, and disclosures related to the XXXXX deposit accounts.
  • Provide the bank’s due diligence for activities related to XXXXX including the prospective offering of merchant processing services. Given that XXXXX reports itself as XXXXX describe additional perceived risks and additional risk management controls contemplated to mitigate such risks.
  • Provide draft or finalized scope of work and engagement letter(s) for any current or anticipated consulting work performed by outside counsel regarding the prospective relationship with XXXXX

If you have any questions regarding this correspondence, please contact Case Manager XXXXX at XXXXX or XXXXX or Acting Case Manager XXXXX at XXXXX or XXXXX

Sincerely,

/s/ Perissa Ali Clark

Perissa Ali Clark
Assistant Regional Director

cc: XXXXX

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