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Bankers Want Rules for Cryptocurrencies. They May Be Coming Next Year.

The banking industry has been pushing for cryptocurrencies to be regulated. The Federal Reserve and other government agencies are now answering the call.

On Tuesday, the Federal Reserve and other agencies laid out a regulatory road map, laying out priorities in areas such as custody, purchasing, collateralized loans, and capital requirements.

In a joint statement, the agencies noted that "the developing crypto-asset industry poses potential opportunities and hazards for banking organisations, their customers, and the wider financial system." "As a result, the agencies have devised a crypto-asset roadmap," they continued.

The Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation are among the agencies working on regulations.

The agencies—the three primary bodies in charge of banking regulation in the United States—have been working on "policy sprints" to draught laws regarding cryptocurrency. The authorities seek to provide clarification on what is legally acceptable into 2022, as well as expectations for consumer safeguards and adherence to present regulations.

The agenda includes custody services, brokering or facilitating crypto transactions for banking customers, crypto-collateralized loans, and oversight of stablecoins—tokens backed by cash reserves and designed to retain a $1 value.

Capital requirements for cryptocurrency are also on the table, as defined by international regulations created with the Basel Committee on Banking Supervision.

Crypto custody and other services are already available from some federal and state-chartered institutions. In June, the Texas Department of Banking approved the holding of "virtual currency" for consumers by banks chartered in the state. Through special-purpose charters, Wyoming and Nevada are becoming crypto banking centres. According to planned legislation, Illinois could be the next state to legalise charter banks.

However, the industry has been seeking uniform standards on what is permitted, in part because nonbank organisations, which are not bound by the same rules as banks, are gaining traction with crypto custody, lending, and trading services.

The American Bankers Association, the industry's leading lobbying group, seeks a "uniform taxonomy for digital assets," including laws for banks and nonbanks, according to a letter sent to the FDIC in July.

Bankers are also advocating for a more lenient regulatory approach. In a letter to the Basel Committee in September, the ABA stated, "Authorities should be mindful not to preempt technological innovation by becoming unduly prescriptive." "Inflexibility would limit financial inclusion and other emerging-technology benefits."

The Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (FDIC) appear to be on the verge of finalising crypto regulations. It remains to be seen whether the sector achieves what it wants.