Bank's Crypto Account Closures

Via secure electronic mail

XXXXX

Subject: XXXXX Deposit Activity

Dear XXXXX,

Thank you for notifying us on May 26, 2023, regarding the Bank’s engagement with XXXXX (collectively referred to as XXXXX) for deposit account related services. On June 6, 2023, you indicated that the Bank’s Board has elected to close all XXXXX accounts.

We understand that the Bank’s Board has authorized management to engage with up to a maximum of three additional crypto company relationships. While the XXXXX related accounts have been closed, we request the following information regarding the Bank’s assessment of crypto-related risks to the banking organization, their customers, and the broader U.S. financial system:

  • List of all XXXXX deposit accounts opened, regardless if activity existed, and the following information for each deposit account created:
  • Statement(s),
  • Beneficial ownership information and all agreements entered into,
  • Deposit account applications.
  • All bank due-diligence and risk assessments performed on XXXXX and related companies/affiliates.
  • XXXXX reports received from third-party reviews including XXXXX and XXXXX. Please also include any recommendations and documentation of any planned risk mitigants responsive to the reports.
  • Board minutes and related packages that discuss the XXXXX relationship, as well as any training that the Board has received on digital assets.

XXXXX XXXXX
Deposit Activity
Page 2

For your reference, 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 Risks to Banking Organizations (Joint Statement) on January 3, 2023 via Financial Institution Letter (FIL)-01-2023 (https://www.fdic.gov/news/financial-institution-letters/2023/fil23001.html). It states that banking organizations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation. Furthermore, this Joint Statement details specific key risks associated with crypto-assets and crypto-asset sector participants that banking organizations should be aware of, while also highlighting that the agencies have safety and soundness concerns with business models that are concentrated in crypto-asset-related activities or have concentrated exposures to the crypto-asset sector.

The FDIC also issued FIL-16-2022, Notification of Engaging in Crypto-Related Activities, on April 7, 2022. It requests that all FDIC supervised institutions that intend to engage in, or that are currently engaged in, any activities involving or related to crypto-assets (also referred to as “digital assets”) promptly notify the appropriate FDIC Regional Director. This includes when initial discussions, conversations or evaluations commence regarding a new or existing partner with crypto-related activities.

Action Requested

  • Within 45 days of the date of this letter, please provide the above-noted items to both the FDIC and the XXXXX XXXXX. The Bank may upload the documents to the existing XXXXX XXXXX Notification Materials Enterprise File Exchange session (https://efx.fdic.gov/).

  • The FDIC requests that bank management be more proactive and timely in its notification of new crypto-related activities, especially if due diligence is being performed or non-disclosure arrangements are entered into.

If you have any questions, please contact Case Manager XXXXX at XXXXX or XXXXX.

Sincerely,

PERISSA
CLARK
Perissa Ali Clark
Assistant Regional Director

cc: XXXXX